LARAMIE — About five new “blockchain banks” could bring as much as $20 billion in assets into Wyoming by summer 2020 as applications open for the new type of bank charter Oct. 1.
Lawmakers are currently working to refine the law passed in 2019 that allows for “Special Purpose Depository Institutions” in Wyoming, a national first that has put Wyoming on the map for “underserved” financial markets like cryptocurrency, blockchain, coal, paycheck lending and firearms.
“I heard a fun phrase this week that an East Coast state is aspiring to copy us and be the ‘Wyoming of the East’ for digital assets,” wrote Caitlin Long in an email to the Business Report. Long is a member of the Wyoming Blockchain Task Force that spearheaded getting the SPDI law and a slew of other blockchain-related bills ready for lawmakers.
The five companies that have expressed an intention to apply for a charter in Wyoming would likely contribute about $4 million in tax revenues as the state struggles to make ends meet with its floundering budget. The most prominent of these is Kraken, a cryptocurrency exchange from San Francisco.
“It’s the first time we’ve been willing to make such a projection, but I have sufficient visibility into it at this point,” Long wrote in an email. However, she pointed out the projection is far from a sure thing, since the chartering process will last about nine months, and two of the institutions have asked for technical corrections to the law, like defining what seem to be simple phrases like “business of banking.”
But despite the uncertainty, Long said, “the pipeline is real, and the opportunity is Wyoming’s to grab.”
The new charters, colloquially known as SPDI (pronounced speedy) banks, don’t require backing by the Federal Deposit Insurance Corp., instead relying on a 100% cash reserve for securing all cryptocurrency assets like the well-known, but less widely understood bitcoin.
Long is a University of Wyoming and Harvard graduate who staked a claim in the blockchain industry through her former New York business. But she recently moved back to Laramie to help develop a welcoming atmosphere for the young industry in a state badly in need of economic diversification as coal falters and other energy sectors remain uncertain.
In a phone interview, she said that SPDI banks could be big for Wyoming. She compared the legislation to South Dakota’s efforts to change usury laws in the early 1980s. Scratching to attract new business to the state during an economic recession, South Dakota leaders eliminated the cap on interest rates and fees to woo the credit card industry.
The ploy worked. Citibank moved its credit card business to Sioux Falls, South Dakota, in 1981, setting the stage for the sleepy agriculture and meat-packing economy to catapult into the epicenter of the credit card industry. According to the Atlantic, by 2013, the move made way for 16,000 banking industry jobs and allowed South Dakota to become a massive market leader with $2.5 trillion in banking assets — more than any other state.
For now, however, Long said she expects each new charter to bring with it between five and dozens of executive jobs per location. The banks won’t be traditional neighborhood banks on the corner, Long said.
“It’s not going to be like a retail bank, because by law they can’t do business with traditional retail customers,” she said, indicating that most would probably wind up in office buildings. “You won’t necessarily know they even exist.”
But that won’t keep the banks from being a national first, and, Long claims, an economic development success story.
“Wyoming didn’t have to spend money to attract these companies to be here,” Long said.
For more on this story, read the October issue of Wyoming Business Report.