CHEYENNE — Wyoming is leading the country as the first to create a state agency-administered stable token, and state lawmakers are considering ways to integrate and promote digital assets in its finance system.
The state is expected to produce its first stable tokens in early July.
Stable tokens, often known as stable coins, are a type of digital currency. Fiat-backed stable coins are backed by the U.S. dollar or euro on a one-to-one basis. In other words, one coin would equal one dollar. This digital currency is considered much less volatile than cryptocurrency, such as Bitcoin, because it’s backed by real, monetary reserves.
In March 2023, the Wyoming Stable Token Commission was created through the passage of the Wyoming Stable Token Act — the first of its kind in the nation. The commission includes the governor, the state treasurer, the state auditor and no more than four subject-matter experts.
This act also authorized the creation of the Wyoming Stable Token (WYST). The commission has the authority to establish rules and regulations around stable tokens, issue stable tokens, manage contracts with financial institutions, and utilize services through the State Treasurer’s Office to invest and maintain the Wyoming Stable Token trust account.
During the Legislature’s Select Committee on Blockchain, Financial Technology and Digital Innovation Technology meeting in Jackson on Wednesday, one person questioned the constitutionality of a state-issued stable token.
Co-Chair Sen. Chris Rothfuss, D-Laramie, said the Wyoming attorney general and legal experts have thoroughly weighed in on this issue.
“The Wyoming stable token is a digital representation of a U.S. dollar, held in trust on behalf of the token holder by the state of Wyoming,” Rothfuss said. “That’s why it’s a ‘token’ and not a ‘coin.’ In fact, we’re very careful about calling it a ‘token’ and not a ‘coin.’”
The commission intends to make WYSTs globally available, said Wyoming Stable Token Commission Executive Director Anthony Apollo in an email to the Wyoming Tribune Eagle.
“WYST can be used to settle dollar-denominated transactions anywhere on Earth, in seconds, with fees under $0.01, while mitigating counterparty risk,” Apollo wrote. “Further, WYST will be stabilized by overcollateralized reserves, and regulatory clarity will be in place through the agency’s rulemaking process — both intended to bolster trust by the end user.”
State-issued tokens are still in the pilot phase, he added, as the commission sorts out compliance framework and testing with Wyoming-based entities. “Alpha” WYSTs, or stable tokens that do not hold any monetary value, are being tested on several blockchain test networks.
July 4 is the target date for the commission to begin producing stable tokens, but it is not set in stone.
“I’ll note that we must prioritize our compliance framework and technical testing prior to issuance,” Apollo said.
The state will benefit off the interest generated by the reserves backing WYST, which are short-duration U.S. Treasury bonds and repurchase agreements. The interest will funnel into a state trust account, and leftover funds will be swept on a quarterly basis into the state’s School Foundation Program.
‘Uphill battle’ for banks
Rep. Lee Filer, R-Cheyenne, who runs a Cheyenne-based crypto mining company called Cryptonite, LLC, said a lot of banks in Wyoming have “strict policies” against cryptocurrency.
“If you want to … transfer anything from a digital-type wallet or a crypto wallet, a lot of them are stopping the transaction,” Filer said. “It’s gonna be an uphill battle. … They think it’s play money.”
Rothfuss said that’s where Special Purpose Depository Institutions (SPDIs), or “speedy banks,” might be the solution. SPDIs are fully-reserved institutions, performing similar functions of a bank, that “will likely focus on digital assets, such as virtual currencies, digital securities and digital consumer assets,” according to the Wyoming Banking Division.
There are also ongoing conversations with community banks and credit unions to integrate digital assets in their systems. Previous regulation from the Federal Reserve Board regarding digital assets in community banks was met with “trepidation,” Apollo said.
The guidance essentially put the burden on banks to develop their own framework for digital assets, and the Federal Reserve would decide whether or not it’s efficient.
“No one’s gonna bite that,” Apollo said.
However, this guidance has since been withdrawn under the Trump administration. Apollo said community bank representatives are now reaching out to him and restarting the conversation around digital asset integration.
“I think this is moving in the right direction, certainly from the community bank side and for the credit unions,” Apollo said.
Federal legislation
At the federal level, Congress is currently considering a federal stable coin bill called the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act). This bill creates a federal definition of “stable coin” and federal regulations for the stable coin industry.
The bill allows for state rulemaking authority over state-regulated issuers, and federal rulemaking authority over federally regulated issuers.
“We’re very close on stable coin legislation at the moment,” said Chris Land, staff director for the U.S. Senate Banking, Housing and Urban Affairs Committee and general counsel for U.S. Sen. Cynthia Lummis, R-Wyo. “It’s possible no further progress could be made. It’s also possible that a deal might get announced this week.”
He added that the Wyoming Stable Token Commission would be exempt from this bill as a governmental entity. The proposed legislation offers other benefits to the Cowboy State, specifically regarding Wyoming-chartered SPDIs.
Land said the GENIUS Act would recognize the SPDI’s ability as an uninsured charter bank to issue stable coins.
“And that’s the first time an uninsured bank charter (would be) placed into federal law,” Land said.
Lummis, who is a longtime advocate of cryptocurrency and the digital asset industry, is already planning the next steps after the stable coin legislation is passed, Land said. Lummis is mapping out a market structure for digital assets, with a proposal to draw the line between “a security” and “a commodity.”
The senator is also working on provisions for digital asset taxation to be included with the Senate’s tax package. This would include “an exemption for mining and staking activities, a de minimis exemption for small digital asset purposes, the wash sale rule, and also permitting charitable contributions of digital assets to nonprofits without having to have an appraisal,” Land said.
Reinvent finance
Rep. Daniel Singh, R-Cheyenne, told the WTE this new digital asset issued by the state “could potentially reinvent the entire banking industry.” It’s a unique opportunity because this system has a government backing to it, instead of an institution or a bank.
“A state has a totally different relationship with the federal government,” Singh said.
But there’s still skepticism statewide about investing in digital currency. Being 28 years old, Singh is one of the youngest members of the Wyoming Legislature.
“They’re talking about, how are we going to hand this off to the next generation? Well, I am the next generation,” Singh said. “These are the tools that we’re going to have to work with for the rest of our lives. And it’s really important that we get this right.”
The Cheyenne representative said it’s a balance between not stifling innovation, and not relying too heavily on “manipulative algorithms that play off of our human instincts to somehow profit corporations in an unfair way.”
“We need to be cognizant of the relationship that we have with the stable token, how that interacts with the federal government, how that interacts with the market at large,” Singh said. “This is new territory. This is one of the only areas in government where you’re dealing with new ideas.”
