{"id":8757,"date":"2022-02-25T14:53:55","date_gmt":"2022-02-25T14:53:55","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/wyomings-state-stablecoin-another-brick-in-the-wall\/"},"modified":"2022-02-25T14:53:57","modified_gmt":"2022-02-25T14:53:57","slug":"wyomings-state-stablecoin-another-brick-in-the-wall","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/wyomings-state-stablecoin-another-brick-in-the-wall\/","title":{"rendered":"Wyoming\u2019s state stablecoin: Another brick in the wall?"},"content":{"rendered":"
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For a state with a small-town feel, Wyoming moves with big-city alacrity when it comes to things crypto. According to the bipartisan bill introduced into its legislature last week, a Wyoming stablecoin could debut before the end of 2022. The announcement caught even Wyoming banker and cryptocurrency champion Caitlin Long by surprise.\u00a0<\/p>\n

\u201cDidn’t know it was coming,\u201d tweeted<\/a> the Avanti Bank CEO.<\/p>\n

It also raises some questions: Is a stablecoin really needed by Wyoming\u2019s citizens? Is it feasible? Will it upset the state\u2019s commercial banks including its recently chartered special purpose depository institutions (SPDIs) like Avanti which has issued a stablecoin-like product itself?<\/p>\n

Moreover, is a state-issued stablecoin even constitutional? And, aren\u2019t there enough stablecoins around already? Then again, maybe Wyoming is out ahead of the crypto pack again \u2014 at least in the United States \u2014 and other cities and states will soon jump on the stablecoin bandwagon?<\/p>\n

\u201cGiven that regulators are still scrambling\u201d to understand and deal with crypto, \u201canything a state like Wyoming does that is a new data point is going to have an impact.\u201d Rohan Grey, assistant professor at Willamette University College of Law, told Cointelegraph. It would be \u201ctreated as part of the landscape,\u201d something to which U.S. regulators and even Congress would have to respond, he said.\u00a0<\/p>\n

Senate Minority Leader Chris Rothfuss, one of the Wyoming Stable Token Act\u2019s four sponsors, told Cointelegraph that many people in Wyoming, as well as beyond, are still reluctant to use stablecoins \u201cbecause they don\u2019t have confidence in the assets\u201d that stand behind them. Will the token really be redeemable for United States dollars upon demand?\u00a0<\/p>\n

\u201cIt\u2019s still a question-mark\u201d in the minds of many people, Rothfuss said. With the Wyoming stablecoin, \u201cthey will know that they will be backed 100% by U.S. treasury bills.\u201d\u00a0<\/p>\n

Wyoming has been a pacesetter in crypto\u2019s breath-taking global expansion. It was the first U.S. state in 2020 to charter special purpose depository institutions, which are permitted to house cryptocurrencies along with fiat, and also the first U.S. state in 2021 to recognize decentralized autonomous organizations (DAOs) and afford them the same rights as limited liability companies.<\/p>\n

Wyoming State Capitol building. Source: Bradlyons<\/em><\/figcaption><\/figure>\n

Maybe not this year<\/h2>\n

Once Wyoming\u2019s treasurer determines that a stablecoin is feasible, then that official will be required to \u201cissue a Wyoming stable token not later than December 31, 2022,\u201d according to the bill.\u00a0<\/p>\n

Does that mean we\u2019re likely <\/em>to see a Wyoming stablecoin before year-end, then? Passing the legislation this year \u201cwill be a bit of a challenge,\u201d Rothfuss told Cointelegraph but, at a minimum \u201cwe\u2019ll get feedback.\u201d There is no question in his mind, however, that if the bill doesn\u2019t pass this year, they will bring it back next year.\u00a0<\/p>\n

What about Wyoming\u2019s private banks, might they have a problem with a state-owned entity competing for retail deposits or maybe even with their own stablecoins? As noted above, Avanti Bank, Wyoming\u2019s second SPDI after Kraken Bank (both were chartered in late 2020) already has a product called Avit, described on its website as a \u201ctokenized, programmable US dollar,” which sounds a lot like a stablecoin. Would a Wyoming stablecoin compete with Avanti Bank?\u00a0<\/p>\n

Rothfuss told Cointelegraph that he didn\u2019t intend Wyoming\u2019s stablecoin to be competitive with Avit, though he didn\u2019t discuss his proposal beforehand with Long, either. \u201cWe\u2019re not looking to capture independent business.\u201d<\/p>\n

The demand for digital assets is expected to grow exponentially in coming years, continued Rothfuss, and there is room in the state for both a state-issued token and a private bank(s) stablecoin.\u00a0<\/p>\n

In her tweet, Long also called<\/a> the Feb. 17 bill a \u201cmind-bender\u201d that raises \u201clots of questions,\u201d while adding she loved \u201cthat Wyoming continues to explore cool #crypto ideas!\u201d Avanti did not respond to Cointelegraph\u2019s request for comment for this story.\u00a0<\/p>\n

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NEWS–bipartisan group of top #Wyoming<\/a> legislators proposed a bill for State of Wyoming to issue a #stablecoin<\/a>, 100% backed by USTreasuries, where the State keeps the float. I see pros & cons (didn’t know it was coming) but\u2764\ufe0fthat Wyoming continues to explore cool #crypto<\/a> ideas! https:\/\/t.co\/BXbELukUQE<\/p>\n

\u2014 Caitlin Long \u26a1\ufe0f (@CaitlinLong_) February 17, 2022<\/a><\/p><\/blockquote>\n

\u201cTechnology neutral\u201d<\/h2>\n

What about technology: Would the Wyoming stablecoin be built on the Ethereum platform, as have many but not all stablecoins?\u00a0<\/p>\n

\u201cWe\u2019re technology neutral so far,\u201d said Rothfuss. Wyoming could use the Ethereum blockchain or the Solana blockchain or another one. What might be ideal is if the stablecoin could eventually operate on multiple blockchains, he added. It is still much too early in the process to be making technical decisions now, however.\u00a0<\/p>\n

Some have asked if a state-issued stablecoin would even be legal under U.S. law. Only Congress has the authority to regulate money in the United States, after all. Could a state-issued stablecoin be deemed unconstitutional?<\/p>\n

\u201cThis is not a new currency \u2014 this is the tokenization of the U.S. dollar,\u201d Rothfuss told us. As such, it shouldn\u2019t violate Article I, Section 8 of the U.S. Constitution which provides that only Congress shall have the power to \u201ccoin money and regulate the value thereof.\u201d<\/p>\n

Not all are so sure, though. Because the Constitution mentions \u201cmoney\u201d specifically, \u201cIt is crucial to determine what constitutes money,\u201d Max Dilendorf, partner at the Dilendorf Law Firm, told Cointelegraph. \u201cTraditionally, money has been defined as a medium of exchange and a store of value. Whether state-backed stablecoins fall under Article I, Section 8 is a question that is yet to be answered by the Supreme Court.\u201d\u00a0<\/p>\n

A Wyoming stablecoin could also impinge on Congress\u2019 power to regulate interstate commerce, added Dilendorf. Because those individuals or entities exchanging cryptocurrency are unlikely to all be located in the same state within the U.S., \u201cthe cryptocurrency is likely sent across state lines and, therefore, subject to Congressional regulation as interstate commerce,\u201d he said.<\/p>\n

Congress could technically enforce the provisions of Article I using its Necessary and Proper Clause (NPC) powers to \u201cprevent states like Wyoming from issuing stablecoins because this could tamper with existing regulations of interstate commerce,\u201d added Dilendorf.\u00a0<\/p>\n

Overall, applying the latest Supreme Court logic from the United States v. Lopez <\/em>(1995) decision and Congress\u2019 plenary powers under the NPC, \u201cit seems that Congress could regulate and put a stop to the issuance of state-backed stable coins,\u201d Dilendorf concluded.\u00a0<\/p>\n

There are other questions, too. Even if a Wyoming stablecoin passed legal muster, would it eventually be superseded by a digital dollar? That is, would anyone want to use it?<\/p>\n

\u201cEven though federal regulators are talking about a digital dollar and a stablecoin co-existing, whether there would be as much public interest in a state-issued stablecoin once a digital dollar existed is a different question,\u201d answered Grey.\u00a0<\/p>\n

Who\u2019s next?<\/h2>\n

If a Wyoming stablecoin were issued and began to gain traction, would other U.S. states or municipalities follow and issue their own stablecoins?\u00a0<\/p>\n

\u201cThe next likely place you\u2019ll probably see this is at the city level, a place like Miami or New York City,\u201d for example CityCoins, said Grey. Wyoming appears to be far out ahead of other U.S. states, but a second place \u201cwhere it could happen is Texas,\u201d he opined.\u00a0<\/p>\n

\u201cI am not sure what the significance of the first U.S. state-issued stablecoin is,\u201d said Dilendorf. \u201cThere are already Miami and New York coins facing similar federal questions of law.\u201d<\/p>\n

Grey, who helped draft the U.S. 2020 Stable Act that was introduced to Congress, has called for closer regulation of stablecoin issuers, requiring them to to be insured depository institutions, for example. He saw some positive aspects in the Wyoming proposal.\u00a0<\/p>\n

For one thing, a publicly issued stablecoin would probably have more \u201cprocedural transparency,\u201d though even a state player might eventually migrate away from having 100% U.S. treasury-bill reserves. Still, \u201cIt\u2019s unlikely that everything will happen behind closed doors\u201d as occurs with privately issued stablecoins.<\/p>\n

\u201cI certainly have less of a problem with Wyoming\u2019s stablecoin than the private ones,\u201d said Grey, who further suggested that Wyoming\u2019s proposal, which uses the language of the crypto world \u2014 not language used by those advocating for public banks, for instance \u2014 could also be meant to further \u201cthe normalizing of crypto in general.\u201d\u00a0<\/p>\n

So, Wyoming might be fighting the good fight for crypto in its own way? \u201cYes, normalizing the language, normalizing the model \u2014 normalizing the whole sector,\u201d said Grey.<\/p>\n

Is that how Rothfuss sees it, i.e., Wyoming is using the process to make a sort of commitment to crypto\u2019s future?\u00a0<\/p>\n

\u201cIt might be seen as a statement,\u201d Rothfuss told Cointelegraph, \u201cbut, we\u2019ve been talking about all this for five years now and this is really just another piece in the puzzle \u2014 like DAOs are a piece and digital identity is a piece \u2014 that has to be fitted. And, if we don\u2019t have it just right at first, we\u2019ll fix it.\u201d<\/p>\n<\/div>\n