Chance still exists for Wyoming virtual currency

CHEYENNE — Wyoming missed one opportunity earlier this year to become the first state to have its own virtual currency.

That hasn’t dashed the hopes of some cryptocurrency stakeholders and legislators. They still hope, via a second try, to beat out any other state in coming up with the first digital token tied to the value of an actual U.S. dollar.

It’s believed that no other state was as far along as Wyoming in trying to come up with what is known as a stable coin, which is a popular form of virtual money with real value tied to another asset. In the case of Wyoming’s stable token, each one would have been redeemable for $1.

Things were looking good at the end of the 2022 legislative session for the fans of such a financial product, which would be issued by the office of the state treasurer. Senate File 106, the Wyoming Stable Token Act, had passed both the House and Senate by wide margins.

Things changed when, on March 25, Gov. Mark Gordon surprised some legislators and industry officials by vetoing SF 106. He cited concerns that the state treasurer’s office might not have been capable of dealing with the new kind of currency, among other worries: “I look forward to seeing a more thoroughly vetted bill in the Legislature’s 2023 General Session.”

In interviews with and emails to the Wyoming Tribune Eagle since the veto, a number of those involved in the legislative process around this bill expressed optimism the proposal can be revived. It potentially could be revised in time to pass next year and then be signed into law by the governor.

For now, according to a variety of organizations, like the Coin Center, no plan has progressed as far elsewhere in the U.S. as it did here. Wyoming appears to be “the only state legislature that has had legislation proposing to create a state stable coin or stable token,” wrote Heather Morton, the National Conference of State Legislatures’ senior fellow for fiscal affairs, in an email Thursday to the WTE.

Stakeholders’ concern is that another state, particularly one with a full-time legislature, could beat Wyoming to the stable coin punch. In that scenario, another state could launch its own currency before Wyoming could do so.

“A year delay is incredibly costly,” warned Sen. Chris Rothfuss, D-Laramie, the prime sponsor of SF 106. “You need to either win or be one of the many losers.

“When it comes to an innovation like this, second place is the first loser,” he said by phone. “If any other state were to copy this idea and get the product out the door quickly, we, like everyone else, would just use that one.”

Under the vetoed plan, Wyoming could have eventually earned income via issuing the digital money. The extra proceeds could be in the form of money beyond the value of all of the issued stable tokens. Once the state exceeded a 102-percent threshold of that value, some of the excess funds could have gone into accounts related to schools and to the Permanent Wyoming Mineral Trust Fund reserve account.

“It’s disappointing that a bipartisan enrolled act that had extremely high support in both chambers got vetoed,” wrote Rep. Mike Yin, D-Jackson, in an email to the WTE in the days after Gordon’s action. “It would have helped to diversify the state’s revenue streams and had lots of checks to ensure it would be enacted appropriately.”

Many private financial firms have issued or are interested in such stable coins. As interest among banks, consumers and others in crypto has increased in recent years, so also has attention increased about such stable financial instruments.

“That all died on the vine when that hit the governor’s office,” Wyoming digital mining adviser Sean Murphy said about momentum for this stable coin. He noted the legislation would not have required the state to issue it should it be determined that doing so would violate the law.

“It was like we lost that chance while the stable coin market is hot.”

These investments could be equated to a money market kind of fund, where the tokens are not meant to gain or lose value beyond what an underlying asset itself does. In Wyoming, under the plan that Gordon vetoed, the state would have invested the money it got by issuing the digital currency in U.S. Treasury bills. Such bonds are considered to be extremely safe investments, just like having savings in U.S. dollars or in another widely used physical currency.

Legislators and those from the crypto industry said neither Gordon nor his aides appeared to have sought changes to SF 106 or voiced opposition before it passed.

Generally speaking, “often the governor is not actively involved in legislation” during the drafting and lawmaker consideration process, Gordon’s spokesperson, Michael Pearlman, said by phone Thursday. “He tends to wait until the legislation is brought to him” to issue such an assessment, Pearlman added.

Pearlman emphasized that Gordon “did make it clear in the (veto) letter that he encouraged them to bring the bill back.”

By contrast to the governor’s office, some said, the state treasurer’s office did engage with stakeholders during the legislative process. The treasurer’s office said Friday it did not yet have any comment.

In his veto letter, Gordon went on at some length about issues with the state treasurer. During the legislative session, there were news reports that the treasurer’s office was not able to fully track some funds.

“The Wyoming Treasurer’s Office is struggling to keep current with its other obligations to the state, and despite assurances that the processes described in this bill are simple and straightforward, I remain unconvinced that this camel can carry even one more straw,” Gordon had written in his late March veto message.

A Dec. 31 deadline to issue a stable coin “is quite aggressive, especially considering the Treasurer’s Office, which is tasked with implementing this Act, is busy addressing other critical concerns related to accounting for its other investment activities,” Gordon also wrote.

It was not “entirely clear that the issuance of a Wyoming cryptocurrency, backed by assets held by Wyoming taxpayers, yet traded by others, would not run afoul of Article 16, Section 6 of the Wyoming Constitution,” according to Gordon. SF 106 stipulated that the attorney general would have had until Nov. 1 to report on any legal concerns.

Already, the failure of SF 106 to become law has changed some plans.

Before the veto, American CryptoFed had planned to use the Wyoming stable tokens to essentially convert its own digital currency into another financial instrument in order to pay for sales and use taxes.

“In anticipation of the Wyoming Stable Token law, American CryptoFed DAO did build its business plan to use Wyoming Stable Token,” Chief Operating Officer Xiaomeng Zhou said via email this past week. The “Wyoming Stable Token is necessary to create an end-to-end token economy. Now, American CryptoFed DAO is planning to use USD Coin (USDC), another stable coin jointly issued by Circle and Coinbase, hoping Wyoming Stable Token can become a reality in the near future.”