Wyoming’s state legislature and Governor have signed into Law new provisions that will exempt certain types of crypto assets from securities laws.
The legislature recently passed, and the governor signed, five bills that many in the Cryptosphere view as highly beneficial to blockchain, ICO and cryptocurrency businesses.
The Wyoming lawmakers have also finished work on measures to exempt cryptocurrencies from the state’s money transmission laws and approve the use of blockchain-based records for corporations.
The key provisions exclude “a developer or seller” from the applicable securities laws provided the Developer/Seller complies with certain conditions; Specifically, that the token being offered isn’t being offered as an investment and that the token can be exchanged for something – ie, that it has some kind of utility.
The exemption will also only apply in the event that the seller or developer “has not entered into a repurchase agreement of any kind or entered into an agreement to locate a buyer for the token.”
In addition, the new law also lays out an exemption from being classified as a broker-dealer in relation to the token, provided that the standards listed above are met.
Certain parties are excluded from the bill, namely banks and other financial institutions such as credit unions and savings and loan associations.
Blockchain Tokens
Bill number HB 70 addresses “open blockchain tokens.” With certain exceptions, the bill exempts from specified state securities laws and the state money transmitter law, certain activities related to such tokens.
Firstly, the said law exempts from specified state securities laws a person who develops or sells the token if:
(a) the person files a notice of intent;
(b) the “purpose of the token is for a consumptive purpose, which shall only be exchangeable for, or provided for the receipt of, goods, services or content, including rights of access to goods, services or content;” and
(c) the person did not sell the token to the initial buyer as a financial investment.
To fulfil this third element, the token cannot be marketed as a financial investment and at least one of the following criteria must be met:
- the developer or seller must reasonably believe he/she sold the token for a consumptive purpose;
- the token has a consumptive purpose available at the time of sale and can be used at or near the time of the sale for that purpose;
- the initial buyer is prevented from reselling the token until it can be used for a consumptive purpose; or
- the developer or seller takes reasonable precautions to prevent buyers from purchasing the token as a financial instrument.
The provisions st out in (b) and (c) attempt to cover what is commonly known as a “utility token” or “consumer token.”
Secondly, the new law exempts “facilitators” (ie persons “who facilitate the exchange of an open blockchain token”) from specified state securities laws if they file a notice of intent, have a “reasonable and good faith belief” that a token subject to exchange meets the requirements of (b) and (c), above, and take “reasonably prompt action” to cease exchanging any token that does not meet those requirements.
Thirdly, the new law exempts from the state money transmitter law a person who develops, sells, or facilitates the exchange of an open blockchain token.
Interestingly, this exemption is not limited only to those tokens that meet the requirements of (b) and (c), above.
Taken on face value these new legislative provisions would appear to place Wyoming on the list of tax jurisdictions wherein one might consider launching/incorporating an ICO (particularly given that a Wyoming LLC can, if structured a certain way, potentially deliver a nil tax outcome).
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