CHYENNE, Wyo. (Jan. 7, 2019) – A bill filed in the Wyoming House would create a legal framework for the establishment of special banks to serve cryptocurrency and blockchain businesses. The proposed law would help expand the of use digital currency and help undermine the Federal Reserve’s monopoly on money.
The House Minerals, Business and Economic Development Committee filed House Bill 74 (HB74) on Jan. 4. The legislation would create a legal framework for chartering “special purpose depository banks.” These banks would be tailored to serve cryptocurrency and blockchain businesses.
According to the legislative findings, “The rapid innovation of blockchain technology, including the growing use of virtual currency and other digital assets, has resulted in many blockchain innovators being unable to access secure and reliable banking services, hampering development of blockchain services and products in the marketplace.” Blockchain innovators also have greater regulatory compliance challenges under federal anti-money laundering laws. Due to these intricate obligations, many traditional financial institutions refuse to provide banking services to blockchain innovators. Often, they refuse to accept deposits in U.S. currency obtained from the sale of cryptocurrencies or other digital assets.
HB74 would facilitate the development of a new type of financial institution with expertise in customer identification, anti-money laundering and beneficial ownership requirements integrated into their operating models.
“Authorizing special purpose depository banks to be chartered in Wyoming will provide a necessary and valuable service to blockchain innovators, emphasize Wyoming’s partnership with the technology and financial industry and safely grow this state’s developing financial sector.”
Last year, Wyoming enacted several new laws to encourage and facilitate the use of cryptocurrency and to support the development of blockchain businesses. Policymakers in Wyoming have publicly stated they want to position the state to become the national leader in cryptocurrency and blockchain business.
Wyoming’s commitment to opening the door for the broader use of cryptocurrencies take an important first step toward generating currency competition. If other forms of money, whether it be cryptocurrencies or gold and silver, gain a foothold in the marketplace against Federal Reserve notes, people will be able to choose them over the central bank’s rapidly-depreciating paper currency. This freedom of choice would help allow Wyoming residents to secure the purchasing power of their money.
In a paper published at the Mises Institute, Constitutional tender expert Professor William Greene said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it could create a “reverse Gresham’s effect,” drive out bad money, effectively nullify the Federal Reserve, and end the federal government’s monopoly on money.
“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people.
Cryptocurrencies open up another pathway to this same goal.
The House Minerals, Business and Economic Development Committee will take up HB74 after the Wyoming legislature convenes for its 2019 session on Jan. 8. It will have to pass by a majority vote before moving forward in the legislative process.
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