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Toby Hazlewood

Wyoming Is Now a Bitcoin-Friendly State - What Opportunities Could This Bring?

2021-03-25

The first-mover's advantage

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While President Joe Biden has yet to go on record formally with an opinion about cryptocurrency and Bitcoin, many key individuals within the Federal Government have been open about sharing their perspective.

On 22nd March, Fed Chairman Jerome Powell was dismissive of Bitcoin, describing it as follows:

It’s more a speculative asset. It’s essentially a substitute for gold, rather than for the dollar.

In February, Treasury Secretary Janey Yellen criticised Bitcoin for being an "extremely inefficient" means of carrying out transactions. In January, she was dismissive of Bitcoin, describing it as a tool of criminals and intrinsically linked with the funding of terrorists.

In all cases so far, the commentary seems to be based on the same superficial knowledge and cliched headlines, suggesting these key figures in the US Government have done very little research.

The same cannot be said for the leaders of states like Wyoming who are being much more decisive and positive.

Bitcoin is controversial

Bitcoin is a divisive subject at the best of times. Many are critical of its impacts upon the environment as a heavy consumer of electricity. Others believe it's simply a scam or an investment bubble waiting to burst and take with it the money that opportunist investors have staked in search of riches.

Meanwhile, the biggest and best-known cryptocurrency has been enjoying a surge in value and profile of late as its price hovers around $50,000. Companies like Tesla have publically invested billions of dollars of their reserves in it, and yesterday Tesla also began accepting Bitcoin in payment for their electric cars.

There's a clear gulf between those who see it as an opportunity for the potential it offers as a technology, as a store of value and a means of moving some financial control out of the hands of governments the world over - and those who are skeptical and dismissive of it based on headlines and rhetoric.

It is in taking advantage of this gulf and not waiting for Federal Government to take the lead, that states like Wyoming are blazing a trail.

Being the first to move

As far back as 2019 Wymoing had enacted 13 blockchain-enabling laws which made it the only US state to establish itself formally as pro-cryptocurrency. The laws make it favourable for companies associated with cryptocurrency to base themselves in the state. The effects of these shifts have been profound.

In late 2020 the Governor of Wyoming, Mark Gordon expressed his support for the state having declared its position as crypto-friendly. This has encouraged companies like Kraken (one of the major cryptocurrency exchanges - where customers can buy Bitcoin and other currencies online) to decide to base themselves in the state. Kraken Financial have applied for the appropriate licencing to become a bank based in the state.

More recently, in February of this year, formerly San Francisco-based Ripple Labs have also moved to base themselves in the Cowboy State. Ripple, who offer payment processing solutions associated with blockchain technology and cryptocurrency have also seen Wyoming as the place-to-be when it comes to conducting business within a state that values and sees the potential of cryptocurrency.

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The benefits of being first

The moves by such tech-companies to conduct their business in Wyoming has a number of possible effects for the state. It will ensure that the companies, at the cutting edge of technology are paying their taxes within the state to start with. Then there are the jobs that such ventures bring with them.

COVID-19 has been a prompt for businesses to reconsider whether all employees need to be present in a company office to be productive, and home working will likely be more common in future. But organisations still need corporate headquarters for the members of their team who aren't willing or able to work from home. Similarly, there are all the head-office related jobs that don't simply disappear just because back office teams are able to work from home. The figurehead role of the corporate headquarters isn't going to disappear.

Environmental opportunities

In the state of Kentucky, legislation has been introduced offering favourable energy tarriffs to businesses associated with Bitcoin mining (the process by which new coins are created and the network is sustained - a process that's typically energy intensive). The move by state leaders there, will likely encourage Bitcoin mining firms to move within the state and this has potential to stimulate the state's move to use more sources of green and renewable energy.

With environmental concerns being one of the typical objections cited by cryptocurrency critics, it's foreseeable that Wyoming may follow suit and that cryptocurrency firms adopting the state as their home help to progress the green agenda.

In 2020 around 15% of the energy consumed in Wyoming was from renewable sources. With the smallest population of any state, it is a net-energy supplier and consumes 14 times more energy than it consumes. It is ideally positioned to increase the electricity generated from renewable sources by harnessing the wind (for example) - in 2020 the state doubled its wind-power generating capacity to 1,800 Gigawatts.

Besides wind-power Wyoming has initiatives in place to generate power from hydro-electricity, solar and geothermal sources too. Each of these could feasibly accelearate in their growth as a direct influence of the state's embracing of blockchain technology and Bitcoin.

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Those who lead and those who follow

In the absence of a clear steer from the Federal Government, states like Wyoming, Kentucky, New Hampshire and others are forming their own views and backing these up with laws and policies that position them at the forefront of Bitcoin and blockchain technology. It's a bold move, but also demonstrates that state leaders see potential for states and residents alike that are presented by this technology.

Economic benefits will come about as a result of the additional tax paid by businesses who see the state as appealing. New jobs will be created. Environmental initiatives are likely to receive a boost too. But aside from these direct benefits, there's a strong likelihood of other companies following the lead of organisations like Kraken and Ripple. Such moves could signal a mass-movement away from conventional tech-centres like Silicon Valley.

When the Federal Government gets its act together and decides how it really feels about cryptocurrency and blockchain, there may be changes enforced upon Wyoming to come into line with the Federal lead. But even then, the positive moves taken to-date mean the state will likely maintain its position at the front of the pack.

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