This past week Kraken, a leading US-based digital asset exchange, was approved by the state of Wyoming for a bank charter. The first of its kind in the state, the Special Purpose Depository Institution (SPDI) means that Kraken Financial will operate pretty much just like a bank while setting up an office in Cheyenne, Wyoming.
The news has been widely covered in the crypto and Fintech press but it also received some coverage within the realm of traditional media outside the US. Writing for The Scotsman, Jim Duffy tells readers that Scotland should be inspired by Wyoming and emulate its approach towards regulated digital assets.
“Wyoming has bags of ambition. It has oodles and oodles of energy, passion, and excitement for what the future could bring. It wants to punch above its weight and create new forms of “special” in this thriving state. And only this week, its world-beating plans have come to fruition. Little ol’ Wyoming is going to be the beating heart of finance and cryptocurrency in the USA as the mighty Kraken cryptocurrency exchange is opening its first bank there.”
He reports that public and private individuals in Wyoming joined together in recognizing the benefits of crypto, got together, and did something about it:
“…they had to re-engineer how Wyoming could change its laws and still be legal within a federal framework. Everyone had to be on board in a transparent way. Forget multi-millionaires opening banks on their own or others making sure their positions were advanced – a big problem in Scotland. It was Wyoming first and ego and power trips second. And look at it now … The university is a global blockchain powerhouse, it has now partnered with Kraken to create a major US banking and cryptocurrency financial centre and it will bring in jobs, jobs, jobs. Not just for developers in tech. Home building, infrastructure, the whole nine yards. Do not underestimate what Wyoming has achieved and will accomplish over the next decade. Big lessons to be learned…”
So can Scotland do the same?
Duffy is not so certain as to whether or not legacy systems and entrenched ideologies can be overcome.
The cowboy state of Wyoming, on the other hand, is well known for its independence and business-friendly environment. The state is one of 7 in the US that does not assess a state income tax – a key characteristic that has made it more enticing for residence seeking to reduce what they pay to the government. Wyoming also benefited from a core group of advocates, both the from public and private sector, to get things done. Caitlin Long, a leading advocate of regulatory change to make Wyoming more interesting to Fintech entrepreneurs, has the traditional financial services experience to make people listen
Duffy believes that “with the right people in the room, Scotland could be a powerhouse of cryptography in the next decade too.” But he worries that talk of encouraging this type of innovation will end with just that: An interesting conversation. But Wyoming does present a roadmap for other jurisdictions to emulate. Innovation friendly, willing to update rules, and low taxes, can be a strong incentive for new businesses to locate operations in a new location. As we all know, it is easier to encourage smaller firms to set up shop in a new country/city/state etc. than old companies to move in.