Wyoming is moving swiftly toward becoming the first state to offer a state-backed cryptocurrency, Gov. Mark Gordon said Thursday at a Jackson tech conference unveiling innovations in the digital financial sector.
While issuing what is known as a stable token or stablecoin is not technologically difficult, getting the policy structure around that digital asset just right is the tricky part, the governor said.
“We want to do it right,” Gordon told the audience at the Wyoming Blockchain Symposium 2024. “We want to find the right methodology to be able to implement it. We’ve done a lot of that work.”
Enough, Gordon said, that he’s confident the state is on track to issue what will be the nation’s first stable token in the first quarter of 2025.
“For the state, it’s a wonderful way to help diversify our economy,” Gordon said. “It is exciting to see, as many trust companies have started to move here, financial firms that are looking at Wyoming, understanding we have the ability to be first movers fairly quickly and intelligently.”
The Wyoming Legislature in May passed the Wyoming Stable Token Act that created a special commission to study the issue and ultimately issue stable tokens, which are usually tied to another asset-class, such as the U.S. dollar. The state is one of the first in the country to explore issuing its own cryptocurrency, which Gordon said highlights the Cowboy State’s commitment to innovation.
“Innovation is in our DNA,” Gordon said. “That’s why Wyoming was the first to have the LLC law. (Digital) innovation has really been developed over several legislations, and it’s really remarkable where we are now. I’m thrilled that we in Wyoming can continue to work hard to make sure this is a business friendly environment, that the taxes are low, and that we can push innovation.”
Federal Reserve Holding Back Innovation
Innovation, Gordon added, is something that he believes is being held back by the Federal Reserve.
“There was a time before 2008 when capitalism was really important, and that meant failure could happen,” said Gordon, who is a former Class B federal director for the Federal Reserve Bank of Kansas City. “Somewhere around that 2008 timeframe, we made a decision that too big to fail is something that the government is going to stand behind.”
That decision has had consequences. Among them, Gordon listed stress tests and other obstructions federal agencies such as the Consumer Financial Protection Bureau, Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corp. (FDIC) have placed on smaller banks.
“The Fed now is more of a drag on innovation than it is an opportunity to put America first, to make sure that the dollar remains the standard that we all want to see,” Gordon said. “But it’s also the CFPB, it’s the SEC, it’s the FDIC, which is interested in trying to debank the relationships between digital assets and banks, which is a core piece of what we’re trying to do here in Wyoming.”
The ability to move between standard banking and digital assets is something Gordon believes Wyoming can and should pioneer.
“We can do it safely, and we can build our entire economy,” he said.
The Devil Is In The Details
Not everyone in the state, however, is convinced stable tokens offer enough reward to go with the risks.
“Right now, I just think we have a vast area of unknowns,” Wyoming Banking Association President/CEO Scott W. Meier told Cowboy State Daily. “I wouldn’t say that your Wyoming community banks are necessarily opposed to it, but they’re not necessarily in support. They’re all just watching to see how this is impacting our industry.”
Meier worries about how Wyoming’s stable token is set up to work.
Customers will come in to buy a stable token at say, $10,000. The state would then buy T-bills or tokenized U.S. Treasury bills to “back” that stable token up, as well as holding some real cash that’s on reserve.
The problem, Meier suggested, will be what happens to the value of those T-bills when interest rates spike and someone wants to cash in their $10,000 stable token.
There would be some cash on hand, but Wyoming would need to sell enough T-bills to make the transaction happen.
“But, if you had a treasury bill that had 2% interest and all of a sudden interest rates go up, well you can’t sell that, because nobody’s going to want to buy it,” he said. ‘Those are the things that the market will play funny about.”
And that’s the very dynamic that led to issues for Silicon Valley Bank. Its T-bills no longer covered enough of the value of its uninsured deposits. That made those uninsured depositors nervous, leading to a bank run, which in turn led to the Federal Reserve stepping in and declaring the bank insolvent.
Mapping Out An Entire Galaxy
That’s just the beginning of complications Meier sees with stable tokens.
“Let’s say a bank in Wyoming has a customer who wants to put $100,000 into a Wyoming stable token,” he said. “That money is now out of our system. And maybe that’s good or maybe that’s bad, depending on how you look at it, but from a banking standpoint, that’s $100,000 that’s not in the bank. That’s $100,000 that the bank cannot lend.”
Taking cash out of the system like that could create a scarcity that would have ripple effects in the larger economy. It could increase interest rates, for example, and make it more difficult for businesses to operate.
Then, too, there’s the question of how Wyoming will police its stable token to ensure it’s not being used for money laundering.
“We won’t know who has these stable tokens,” Meier said. “I think the Feds are looking at this saying, ‘How do we make sure you follow the anti-money laundering? It’s so vague and so vast, it’s a little like trying to maybe map out the galaxy.”
Don’t Be Late To The Digital Table
Gordon, on the other hand, has said that other countries are already working out these issues. If the United States is late to the table, it risks coming in second place in a hostile world, where certain entities, such as China, hope to supplant decades of the U.S. dollar’s primacy with digital alternatives of their own.
“This is just a much faster, more immediate way of being able to handle money,” Gordon said. “And I think there are also other values that can be associated with this.”
“In Wyoming, we know that risk is something you have to take to be able to move forward, and risk involves a certain amount of failure,” he said. “And this is an area where Wyoming can demonstrate that it is still important to be able to take a risk, that capitalism still has the opportunity.”
The opportunity now, Gordon added, is in digital assets, an area that the world at large is rapidly converging on, and an area where Wyoming can not only demonstrate leadership, but, by being a first mover, gain an advantage when it comes to attracting new businesses with new models.
That’s not just about making “tons of money,” Gordon said.
“The rest of the world is adopting things very quickly that are different, and there are certain advantages to that,” he said. “Wyoming has been part of that innovation, and, I think for us, the ability to move into that space boldly, make sure it’s transparent, make sure its domestic, make sure that people can have confidence in the way Wyoming is doing it, is going to be really critical.”
Renée Jean can be reached at renee@cowboystatedaily.com.