Can I Sign Nevada Banking IOU

Can i industry sign banking nevada iou

she has a Juris Doctor from Harvard Law School a master's in public policy from the Kennedy School of Government and a bachelors from the University of Wyoming she's a 22-year Wall Street veteran who's been active in Bitcoin and blockchain since 2012 yeah that's right oh gee she's been leading the charge to make her native state of Wyoming an oasis for blockchain companies ever since she's helped to enact 14 blockchain enabling laws in 2018 and 2019 in Wyoming was that yeah that's right thank you and from 2016 to 2018 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of symbiont it is my great great great pleasure to welcome today Caitlin long thank you thank you thank you everybody it is my honor to be here I am thrilled to participate in an event that has such an education focus and I understand that there may be continuing legal education and credit for the attorneys in the room so we have to go exactly 50 minutes in a minimum of 50 minutes in order to get CLE credit so I'm gonna dive right in let's please make this interactive I am a Wyoming native and I kind of knew pretty early on that the ethos of Wyoming and the ethos of this industry have a lot of overlap there Wyoming is is a state that believes in rugged individualism it is a state that tends to buck the system and in fact actually the alma mater my alma mater is motto is bucking the system since 1886 and it's it is a state that actively embraces privacy in fact actually there were some folks in Wyoming who were embarrassed that Wyoming LLC's by the way the limited liability company form was invented in Wyoming in 1977 and there were some folks who were embarrassed that Wyoming LLC showed up all over the Panama papers and so the legislature considered whether the state should start collecting information about the owners of Wyoming LLC's and in fact the legislature voted it down overwhelmingly because they respect privacy so there's so much about the ethos of Wyoming that actually fits with the ethos of this industry I think a lot of folks early on we're sort of scratching their heads saying why Wyoming it's in the middle of nowhere it's not a state that had that is known for financial services it's not like South Dakota which is its next-door neighbor that has the credit card industry right so there wasn't anything that was obvious to to folks who didn't know what was really going on but in fact it's really obvious and just two weeks ago the governor of Wyoming signed a proclamation that he wants to make Wyoming the cryptocurrency capital of the United States he actually used those words so so so it's it's a it's a it's a real movement and what I'd like to talk to you today about is let me make sure I understand how this clicker works there we go there we go the impact of that and the meaning of this for you I'm a volunteer I am a trained attorney but I'm not actually licensed to practice in Wyoming none of this is legal advice and I have been when folks contact me directing you to folks who actually can help you we're starting to get some pretty sophisticated attorneys in Wyoming on these legal issues for your business but I'll give you the the questions that you need to talk about let's start with this whole code is law versus backwards compatibility of code with the law I think a lot of developers I took a lot of heat actually from developers in the Twittersphere early on about why Wyoming why would we bother to create enabling laws because code is law and we don't need to pay attention to the law and I am sympathetic with that view but I also recognize the reality that none of us live in a legal system without laws right unless you're living on a/c stead you are living in a place that actually has existing laws and so how do we take new technology and make sure that it doesn't conflict with the law we make it backwards compatible with the law to use tres mayor's phrase I like that phrase because that's exactly what Wyoming is done these laws that we've passed have put a lot of words on the books but what they are is actually giving there they are every single one of them is an enabling law with one exception which is a new type of financial institution I'll talk about in a minute but what they do is also of the lawyers in the room the ability to give legal opinions because they actually spell out specific things that enable this technology to exist I think Wyoming already is the Delaware of digital asset law for those who are not familiar Delaware's whoa is where most companies incorporate most companies are domiciled there and and most LLC's so between corporations and limited liability companies Delaware has always dominated and there are a few reasons for that Delaware has of course a long very extensive body of case law because of its leadership in this area which has been it was more than a century old but it also has a very specialized court where business disputes can be litigated and a lot of attorneys will wreck it will make recommendations to you businesses to put your business there just because it's it's where everybody goes and in fact actually there's been I've heard some rumblings that the venture capital world still wants Delaware holding companies for startups in this industry even if you're operating businesses in Wyoming I'm gonna encourage you to challenge that because Wyoming just created a Chancery Court a bit of court first specialized business disputes along with all the other body of law that we created we're making a real run at Delaware we are already number two for business entity organizations as I mentioned in the in the middle of the slide it goes Delaware and then Wyoming then Nevada and then a big drop-off to the other big states like California and Texas but you want to organize your business in one of those top few states and Delaware's gonna hit you with a bunch of taxes that Wyoming and Nevada actually Nevada has a gross receipts tax so Nevada's going to hit you with taxes too really Wyoming does stand out and in this industry I'm going to convince you I hope that the legal certainty that you're going to get is worth the trade-off of the fact that that that Wyoming is newer than Delaware in this whole Chancery Court issue there are three ways to benefit here Wyoming has a choice of law for your contracts you don't have to be a Wyoming domiciled entity to have your your your Terms of Service and other related contracts governed by Wyoming law and I think you're going to do that the second one is domicile your company in Wyoming there are a few thousand companies probably by now that already have done that and again we don't have great statistics because Wyoming doesn't collect that information they don't have that information to share with the IRS and then also locate in Wyoming you're gonna I think by September start to hear some announcements of some pretty significant companies that if they get licenses that for these new special-purpose depository institutions the applications for which open October first if they get those licenses they'll be in Wyoming by this time next year and so I think there's a CO tail effect that's going to come pretty pretty fast and furious Wyoming is a state we want to be known as the state where digital asset investor rights are protected obviously I'm a big proof Aki's person but I also recognize that big institutional investors by law have to custody their assets with third parties and therefore digital asset custodians in Wyoming have to be solvent many of you know I've I'm a I'm actually a pretty big critic of the traditional financial industry not so much the people there are certainly some nefarious people but the market structure it's a bad system design we wouldn't design the financial system the same way if we were creating it from scratch today it would look a lot more like what these decentralized technologies that we're all here to talk about today would enable we wouldn't create these centralized power structures we wouldn't have captured regulators that enable things that we all kind of in our gut know are illegal I'll give you an example a very recent example the uber IPO the uber IPO a lot of folks lost money on that and it came out that the underwriters did something called naked shorting now what is naked shorting naked shorting is selling more selling an asset you don't own selling more securities than actually existed the way underwriters work and I worked on Wall Street a long time worked on IPOs actually as well if you're gonna sell a million shares the underwriters get what's called a green shoe and over a lot man option which is legally validly issued shares that they can sell into the market to stabilize the price but in the Ober IPO not only did they have the ability to issue more shares through the green shoe which everybody knows about but they unbeknownst to everybody had the ability to sell more shares that were not validly issued what do you think that did to the price it suppressed the price right and so I went digging when all that happened and said how earth was this legal right it's one of those things that hits you in the gut how can it be legal for somebody to sell something they don't own that doesn't even exist that's not validly issued and it turns out it was legal the SEC allowed them to do it so the good news about the state of Wyoming and by the way there are Dutch it's one of many examples I saw head shaking in the room that's just one of many examples that I can point to about why the existing financial system is unfair to regular folks it also is unstable to regular folks or to everybody and and Wyoming is going to be creating the the industry that will be investor friendly it will be the place where investor rights are protected and the place where all the financial institutions that come in from this new industry are solvent I'm not going to read all the all these slides these are available to you on SCAD these they just describe the bills that we passed but I'll highlight a couple of things the last one there's no there's no income tax in Wyoming and and we also passed in 2018 a law that clarifies that there's also no property tax on digital digital currencies so what that means is that basically your crypto is not going to be taxed at the state level in Wyoming the other bill that I think is probably the most important one from 2018 is the second one on the page House bill 70 which defined utility tokens and exempted them from state securities laws now the way securities laws work in the United States is that the feds have supremacy over the states so you may think well what impact did that really have if we're trying to say that certain tokens in this industry are not securities under state law the SEC Trump's the state so what does that matter and the answer is the way the legal regime works in this country is that property law is defined by the States securities law is defined by the feds that's a subset of property love that's been carved out the Supreme Court said that goes to the feds so if property the purview of the states and securities are the purview of the feds what we did is step out and say hey you utility tokens fall within state jurisdiction SEC that's not your jurisdiction and by the way it's pretty clear the SEC has been pushed by what Wyoming did and now we have multiple states in coop including where we are today Colorado having copied that Montana did as well I believe Utah is on the way to do it there's this Rocky Mountain arc of states that's pushing back against the feds on this on this federal jurisdiction grab the really important stuff though got done earlier this year and again I won't go through the list but let me give you the highlights the most important thing we did is we defined digital assets as a type of property under Wyoming law again I just went through the the high level that the that that property law is the purview of the states so what we did was basically say alright there's a new type of property out there it's an intangible type of property called digital assets we set up three different different definitions in it virtual currencies which is Bitcoin litecoin etc utility tokens which we'd already defined in the previous year as something distinct separate and distinct from securities because they're tokens that have primarily a consumptive purpose and then digital securities which are of course acknowledged to be securities and therefore subject to federal jurisdiction for securities regulations but they are property for state law purposes that's really really really important because no other states done that yet and we actually ended up in a fight unintentionally with a nationalist organization called the inform law Commission that tries to keep state's laws uniformed and it turns out that there had been very interesting history of how the Uniform Law Commission was looking at regulating these this industry they put out a proposed state law called the Uniform virtual currency Business Regulation Act that coin Center and others had been working on in 2017 to try to counter the bit license in New York and it hasn't stood the test of time very well and thank goodness nobody no other state no state has enacted it at all but something curious happened the uniform law Commission without reopening the whole discussion added an addendum a supplemental part to that proposed state law for all the states to turn you know once the uniform law gets proposed the idea is that every state will will enact it you know uniformly and oftentimes that happens right we want to try to keep commercial law as consistent from state to state as possible without federalizing it and that's how the inform Law Commission works but something curious happened they created this supplemental act for how to define property in this industry and how to create what's called a security interest against it and that is if you lend your coin how do you ensure that that's an in that San enforceable contract if there's ever a dispute and that the lien on your coin is is actually legally recognized now a lot of folks are going to be scratching their heads saying how hell is this coin lending thing actually gonna work how can you ever enforce a lien on Bitcoin right because you cannot record that lien on at the base layer of the technology at the protocol layer there's no way in Bitcoin core to flag that that Bitcoin has is subject to a lien so a lot of folks were thinking that there wouldn't be a coin lending market that would would would evolve precisely because there was no way to record the liens at that level but in fact as you all know there's benefits the coin lending market in the last 18 months has just taken off and so how do you actually ensure that this is legally enforceable and how also do you know if you're buying a Bitcoin that that wasn't subject to a lien that a judge might come back and try to enforce against you so these sound like esoteric questions but they're actually very real I'm not aware that there has been an attempt yet for a judge to enforce a lien against a Bitcoin and so you know a lot of developers probably are scratching their heads thinking these lawyers are off because you know esoteric examples that are edge cases and not likely to happen but I guarantee that at some point they will and unless until we get clarity on how you actually can it kind of create an enforceable lien on these assets what's going to happen is that people are just going to go off in all kinds of different directions and there is going to be a messy litigation at some point down the road so what Wyoming did was said here's a way to do it I'll get to that in a second but the uniform law Commission coming back to the original story they created this supplement without even consulting with coin Center Peter Van Valkenburg told me they weren't even notified that this was coming so what they did was give the securities industry control over digital assets for commercial purposes some of you are attorneys the way securities are handled under state commercial law is something called article 8 of the Uniform Commercial Code and article 8 basically says you can have certificated stock shares certificated ecurities doesn't have to be equities it can be a bond certificated undone certificated or indirect ownership now the history of this that indirect ownership bucket is actually how most of us own securities in our by arrays and brokerage accounts unless you own the physical piece of paper that's almost certainly what you own is especially for publicly traded securities you own an indirect share now what what it is is it's it's a an IOU basically you don't own that you've probably heard Patrick Byrne talk you ask the question at conferences do you own suit how many of us own stock right a lot of people in the room will will raise their hands and in fact actually the truth is that what we own in our brokerage accounts isn't stock it's an IOU it's just like what we own in our bank account it's an IOU we think we own the deposits in our bank account legally we don't we've lent our money to the bank we think we own the stocks in our IRA or a brokerage account legally we don't we've lent it to the securities firm and by the way they have the ability legally under state law to to issue more of those than actually exists again this is why this is why nobody went to jail during the financial crisis this stuff was actually legal and so now bring it back to the Uniform Law Commission and this supplemental Act they said that all virtual currencies and digital assets get shoved into that regime where you literally have a security entitlement from a securities intermediary who do you think did that at the securities industry would love to get control of this industry right and force all of us into using intermediaries for these assets and so why don't we looked at that and said hell no that makes zero sense these are assets that are bearer assets and we should recognize them as such under under Wyoming law so we went in our own direction and then the uniform law Commission came after us and said they actually did something very unusual they actually demanded that the Wyoming legislature withdraw the bill in the middle of the legislative session well I started today with a little bit of disclosure about the culture of Wyoming how do you think the Wyoming legislators took that it actually emboldened the legislators to enact the bill that we were passing and especially once once once I sat down and walked everybody through it they they understood exactly what was going on this was sort of an attack if you will by the by the incumbents on a state that was actually doing the right thing and saying these are bearer assets we're going to recognize the property rights under Wyoming law for folks who owned them directly as opposed to forcing them into this indirect ownership regime now what's the impact of that for you it means that if you are what's called a I forget how it's phrased in under the UCC but essentially a good-faith purchaser if you didn't know that that Bitcoin was already subject to another lien you take it free and control of that lis of that lien that's the way cash works under the Uniform Commercial Code if you're a good-faith purchaser and you didn't know and you weren't defrauding the rightful owner of that cash then then it's their problem that that somehow you ended up with that cash we also have a lien cleansing provision which is if your assets are located in Wyoming let me come back to that because that's gonna sound very weird to the developers how do you locate a digital asset in Wyoming but if they are located in Wyoming then for to you for two years then all prior liens are invalid and the reason why we picked two years is that's the the the period the statute of limitations under the federal bankruptcy code for fraudulent conveyance so if that hasn't been fraudulently conveyed after two years the liens are cleansed so you have a real reason to locate your coins in Wyoming now how do you do that so we defined locating in Wyoming the follow as a following it can either be physically located there there are a lot of people have taken old abandoned missile silos which are all around Wyoming and turned them into court cold storage facilities you can have your you know your ledger and treasurer and keep keys there you can be a Wyoming resident you can be a Wyoming visit a Wyoming person which includes a business entity under the law it's weird definition but it's person can be a human being plus a business entity so one of the things and I know Pamela's talked about how you do estate planning for your for your coins one of the things that some people do is actually own all their own coins through a Wyoming LLC and you get the benefit of the laws that way and then another way is to actually store your coins in a Wyoming custodian now there is no such thing as an wyoming custodian now because the law allows custodians to apply for a Wyoming special purpose depository institution license as of October first I'm gonna get to that a little bit in a little bit more depth in a moment but hopefully what you get if if you're a developer and this all sounds a little Greek to you is to think is to realize that there's actually some definition around the law here I'm sure we didn't get it perfect but nobody's uncovered major problems with it yet we're going to be doing some technical Corrections to the laws in the next legislative session but so far nobody said this this is unworkable a lot of folks have actually said there's something special here and having that legal definition is really important so I went deep on literally two of the bills which is HB 62 classifying digital assets as a new type of personal property under Wyoming law an SF 125 defining property rights for digital assets and creating the digital asset custody regulatory regime we did a couple of other things that are important at the very top wammy has a FinTech sandbox which essentially says if you're gonna run afoul of existing regulations you can apply to do that and you can get a grant from the regulator for two years with an extension for an additional third year and by the way it's reciprocal with other sandboxes including the UK and Bermuda and Arizona and other states that are that are putting fintechs and boxes in so it's a way for you to actually say all right I'm not gonna comply with existing regulations you just have to apply you have to go to the regulator post a bond and and do it and then just stay in touch with a regulator so that's that's a pretty powerful concept right there all of a consumer protection protection laws still apply but what it means is if there's some crazy law that's in your way that's that's a vestige of history you now have a way to get around it and you just have to stay in touch with the regulator and make sure you're not breaking the basic you know fraud and and and theft and and consumer protection laws we also created HB 113 special electric utility agreements with cryptocurrency miners we got some pretty big cryptocurrency miners coming into Wyoming it's an energy rich state and and the coal industry in Wyoming is basically because of what's happened with coal globally it's it's really on on its knees some of the biggest employers in Wyoming recently declared bankruptcy and shut down some of the mines it's a very sad sad story for the people affected by it and and what what we did was actually enable both the electric utilities to to negotiate special utility agreements outside of the traditional rate making process but we also allowed the big miners this was what this would be of course not the hobbyists these this would be the big ones to come in and actually buy the power plants and and literally set up cryptocurrency mines you've heard all the stories even in Colorado about people being angry about cryptocurrency mines popping up in their state Wyoming saying come on in and doing everything we can to bring them in so let me then talk next about this enhanced digital asset custody regime I've alluded to it a little bit you have to be a licensed financial institution again this is you know how is it that somebody's critical of the financial industry is working on creating a new type of financial institution I'm helping to ensure that that a bridge is being built between these two financial services industries the traditional one which has all kinds of structural problems and the new one that we're all working in which doesn't have those basic unfairness structural problems we worked with the SEC pretty extensively and address the two issues the lack of clarity of legal status of digital assets in bankruptcy this is one of the pretty basic issues if you think about it that before the SEC and the and the powers that be in Washington are going to let big financial institutions get involved with crypto they want to know what the legal status is I just spent ten minutes going through that so we now every judge in Wyoming or everybody judges applying Wyoming law more specifically has a roadmap to understand exactly how those assets are going to be treated under the Uniform Commercial Code and in bankruptcy and any contractual disputes they also the SEC has a preference for banks and brokers dealers over trust companies due to the clarity of the wind-up rules so that ties back up to the previous bullet point which is what happens if a financial institution goes bankrupt and they've got all these assets that have unclear legal status we've got clarity of the legal status now it turns out the SEC for those of you who are interested in custody gave some guidance in July as you may have read and you may have seen me talk about footnote 13 footnote 13 as the SEC buried something in their guidance but it was really important where they said that a bank has a safe harbor for good control location under the custody rule now the interesting thing is how many banks do you know that are actually involved with crypto some are lending fiat right but no regulated bank in the United States is is directly involved with crypto it's not it's not allowed under the FDIC or OCC rules so therefore you know silver gate and and and the like are obviously actively involved in banking the industry for fiat purposes but they're not actually taking any Bitcoin onto their balance sheet so here's the thing the the FDIC is not allowing banks to get involved even for crypto custody right even in even off-balance-sheet for custody just providing custody services much less putting on balance sheet in actually taking in a deposit so if the if the banks are not being allowed to get into this industry and the SEC is saying that a bank has a safe harbor not a trust company has a safe harbor for crypto custody what does that mean it basically means that under the existing regime there isn't a way for this industry to come in and get good control location for digital securities so they've kind of created a perfect block if you will of this industry except this rogue state called Wyoming set up a digital asset custody regime that authorizes banks to custody digital assets so there's one and only one bank in one type of bank in the United States that actually qualifies for that good control location safe harbor under the FCC's rules the the the last the third from the bottom is really important I alluded to this earlier the custody of these Wyoming digital asset custodians have to offer custody under a bailment what's a bailment it's like valet parking for your car or a coat check or something like that when you valet park your car you're not giving them title to your car you're just giving them temporary possession and you're not allowing them to do anything with it but but park it in the in the garage that's a bailment legally you still have title you still have dominion and control you've just given up possession and the temporarily given up possession and the garage is not allowed to do anything other than what you've expressly directed it to do that's exactly how digital asset custodians in Wyoming work that is not how securities custodians work today when you hand over your your brokerage as I talked about earlier your your brokerage assets are sitting in a broker-dealer if you hand over a physical share of Disney stock that your grandparents gave you and you give it to you know Schwab and they turn it into an electronic share that's going to be custody data custodian and that custodian you know they're in an IOU relationship with Schwab who's in an IOU relationship with you they're all subject to that indirect ownership regime that I talked about earlier which allows them to create more securities than actually exists and they're off lending it and doing all kinds of things without your permission and without your knowledge and without paying you I discovered that during running running the pension business at Morgan Stanley where we actually had a type of custody account for securities for a pension fund that did not allow the custodian to lend the securities they were about to be delivered the next day to close a transaction and the custodian called and said we don't have 15 of the securities on this list wasn't one it was 15 and the chief investment officer said how is it possible that you don't have them they're on my screen they're in my account and the custodian said well yeah I know that we owe them to you but we don't have them that is actually a felony under Wyoming law so not only did we set up custody under bailment where it's just like valet parking your financial institution is merely a service provider they're not a counterparty relationship with you they're just a service provider you have legal title to that asset you can choose to own it in a fungible form so for staking coins right you want to give it you want you want it to be in a fungible form so you can actually increase your staking gains you can own it in a non fungible form or you can own it you can choose to own it in the omnes omnibus account where you have that indirect ownership regime if you want to go and lend your coins and and the like but the critical point is under Wyoming law that's the cusp that's that's your choice the individual who's who's depositing assets in a Wyoming custodian is the one who chooses the form of custody that simply doesn't exist in securities today this is a powerful concept and I and I'm a hundred percent confident New York is going to be coming after us when they figure out what this really means but as a result it means that you have significant investor protections I mentioned that there is not a under wyoming law if you sell something you don't own it's a felony there's a great Supreme Court case where somebody actually tried he had an industrial diamond and he pledged it as collateral for a loan and then without telling another bank he pledged the same asset as collateral for a different loan and literally that was that was felony fraud it's great press it great case law precedents I would love to be in a regulatory position someday to be going after Wall Street for doing that because it literally is a felony under Wyoming law but the good news is that the better the better path of course is doing what we're all doing which is just building a whole new financial system and making it fair those digital asset custody rules are going to be released this week and they have some very interesting aspects one is for the first time we'll actually have a definition of fork under under regulatory rules what happens under a fork and we had some of the best people in the industry including Michael berkland we had the whole tech team from crackin we had Kingdom Trust we had silver gate bank we had a lot of people helping us out and I'm pretty sure we got it right because we took months to get this right and the fork policy I think you guys are all going to agree with first of all under under the rules for these custodians they have to clearly define what the asset is by making reference to the source code itself so in the contract I know of a big institution today who says bitcoin is in the contract they defined Bitcoin as a digital asset okay so if Bitcoin Forks guess what they have total control over what they define bitcoin is so under Wyoming did you last a custodian if you're going to be in this business you actually have to define what version of the source code and make reference to the github in your contract then if that coin Forks there are three different scenarios one of which is if they change the the consensus rules from what was in your contract making reference to that original source code version then if the custodian is not going to support the new coin so if there's a change in consensus rules or sorry if they're not gonna support the old the old coin so this would be sort of like if a custodian decided in the east classic Fork that they were not going to continue to support youth classic well your original contract with them is for youth classic right that's the consensus rules that you contracted to deposit your coin there if they're no longer going to support it then they have to give you the ability to the they have to get consent from you and you have to have to give you your coins back if you want them if they are going to support both they just have to notify you and if it's just a soft fork they just they still have to notify you all this got this was months as you probably imagine the devil's going to be in the details I think this is gonna be out this week but I think that the disclosure and the fork policy definitions are going to be received very well because I'm not a developer I know where those limits of my of my abilities are I went to developers who really basically argued out this rule what's the right rule for how to handle Forks and oh by the way your custodian is not as prohibited by roaming law from benefiting from from those Forks if you don't give them the ability to to share in those gains with you so again I think we got this right and what's what you're gonna see is the financial institutions that come into Wyoming have no problem complying with any of this this is all the basic fairness stuff that we would all agree is clarity of property rights this is respecting the ethos of the industry if we're gonna have to set up a third-party institution let's do it this way and and so again this is mostly for institutional investors I'm sure some people will offer these services to retail but this is I think what's going to get the Vanguard's of the world to start offering mutual funds and ETFs and the like there's going to be a hardcore custody regime that's investor friendly in in Wyoming lastly let me close with this special-purpose depository institution this is the killer app it's what I alluded to earlier footnote 13 yeah got to be a bank in order to get the to get the safe harbor for good control location under the custody rule and this is also a this is also going to supersede for people who have the roaming Bank law a bank charter this is gonna supersede the bit license in New York nobody's actually done that yet because of course it doesn't exist but there's great case law and great statute statutory law in New York that if you have another state if you have a state chartered bank from another state that is recognized in 42 states so New York is not one of the 42 states but in New York you are allowed to with the approval of the New York Department of Financial Services open a branch now so you still have to go kiss the ring in New York but basically this license is superior in the hierarchy of financial institution licenses but the the the bottom of that hierarchy is money transmitter and then it goes Trust Company then it goes Bank state chartered bank and then it goes National Bank probably and broker-dealers are sort of off to the side but in in you know in deposit-taking institutions that's the hierarchy you want a bank not a trust company the bit license is somewhere and wrap between money transmitter and Trust Company just to give you some background so if you've got a bank license from another state that Trump's that money got that bit license and so I think what's going to happen is a lot of the folks that have New York trust licenses are gonna end up pivoting into Wyoming they you know keep the New York trust licenses until you get your Wyoming one but this one is this this is a killer app it is for those of you who are Austrians like me it is a bank that cannot lend it's a 100 percent reserved required bank and it's in it is not authorized to make loans that's really important because in the middle there I say it's not a bank under the Bank Holding Company Act we threaded some really important needles here it's a bank when it needs to be and it is not a bank when it doesn't want to be so this is very very very cool and and it is able to act as a digital asset custodian pursuant to its trust powers so let me explain what's gonna happen this is I think a pretty important October 1st is a pretty important date for the industry because exchanges digital asset exchanges are not required to be licensed in Wyoming bank this bank of course is a bank license so it's gonna take six to nine months for everybody after October first to get their license that's why I'm talking about this time next year the doors are going to be open but what's going to happen is that I think a lot of the exchanges are going to come into Wyoming because of all those digital asset laws that I talked about defining property and giving clarity as to the rights and obligations of parties in this industry from a backwards compatibility of a law perspective that respects how the technology actually works and so I think exchanges are coming into Wyoming and I think a lot of what will happen is an exchange will get set up with a sister special-purpose depository institution and so you will actually be having this industry with its own banks with its own fed master accounts now they're gonna have to still comply with all the know your customer and anti-money laundering rules those are federal laws as a lot of you have seen I don't like those laws I think they're unconstitutional but they are the law of the land and so these institutions have to comply with them there's no way around that I wish I could have figured out a way around that but what we did is is basically create a means by which this industry no longer has to be dependent on third party banks you can control your own destiny if you want to because you have a direct relationship with the Fed the Kansas City Fed has been very active with us behind the scenes the governor of Wyoming actually used to be on the board of the Kansas City Fed and he helped the current Kansas City Fed president get her job so there's a nice personal relationship with them and and what we've been told is that Washington is looking at what Wyoming is doing here as sort of the proving ground and they're gonna watch Wyoming for a couple years and then you'll probably start to see them loosen up the the banking regulations maybe three to five years down the line but the only place where you're going to be able to have this kind of financial institution that checks all those boxes is in the state of Wyoming do not be surprised on what what's what's coming down the pike in the next several months in terms of announcements of pretty major players in this industry coming into Wyoming let me stop there we have about I think about 12 minutes left I want to make sure I'm looking at Pamela to make sure we get our 50 minutes in let's fire away with questions please dig in yes yeah the question is who's the uniform law commission that created that supplemental act without going back to that whole group that helped advise them on the original uniform regulation of virtual currency businesses Act who was they it's an interesting question there were no to my knowledge there were no industry crypto industry people involved not even coin Center was involved in that that they is every state has three uniformed law commissioned commissioners it tends to be law professors and retired attorneys right so it's there's definitely a generational difference so shall we say because it's it's a time sink right so actively practicing attorneys don't tend to you know volunteer for a lot of work on things like that oh yes you can find a list of names and draftees on the uniform law Commission's website but to their credit what happened was they they knew they overreached when they demanded the Wyoming withdraw this bill and I think they knew it backfired on him too they've now pulled the whole thing back and said and by the way no state enacted any of those laws and thank God there are all of you in this industry who are watching Nevada actually came the closest believe it or not to enacting it and because it had one of the people who's a law professor at the University of Nevada Las Vegas who was one of the drafters and he's very well respected and he's taught a lot of the Nevada lawyers who went through his law school and he came up and testified for it and this industry came out hard at a grassroots level and said this is nuts these are bearer assets why are you forcing us to put these into third parties in order to get legal recognition and and and they and they got it defeated so this industry is just been awesome our little small ragtag army of people who are volunteers you know in a lot of cases it's people like me we're not developers and the way we can give back is to make damn sure the legal regime doesn't get in our way and try to tear it down when we can and that's what happened and so they got it torn down in Nevada to their credit they've never reopen the whole thing and they recognized the Uniform Commercial Code was created in the 1950s when there was no such thing as intangible assets back then we didn't even recognize intellectual property as an intangible asset under the law so now we have software licenses now we have identity now we have intellectual property we have air rights in real estate all these things that are intangible and how does the law deal with them the answer is not well and so they're now reopening the whole thing and in in in about a month I believe here in Denver the uniform law commission is meeting again to reopen the whole thing and I'm they actually have invited Wyoming to come to their credits I think everything all the sort of history Onix calm down and they now realize I think that they screwed up but it's a very interesting question who was it I asked I asked a rhetorical question was it the securities industry because it's pretty clear the securities industry was the primary beneficiary from what the Uniform Law Commission proposed and they would as you guys all know love to find ways to block the development of this industry but we we've we figured out a way around it and to the uniform law Commission's credit I think they you know they realized that they didn't get it right the first time we're gonna help help them get it right the next time yes sir yes the question is reciprocity on the sandboxes how does it work does it require registration yeah unfortunately it does require registering with the regulator's in each of those regimes so but it's not a it's not an onerous process to my knowledge it's literally just letting the regulator know who you are where's your address there may be a bond that has to be posted and that depends on what your business's so in some cases it's as small as five thousand dollars it's not it's not onerous it's designed to help innovators but designed to make sure the regulator's know how to reach you if if you're doing something that breaks other laws like the fraud laws etc yeah so I think it is unfortunately like money transmitter or you're probably gonna have to go state-by-state and notify but it's not it's not an onerous you know licensing regime I saw a hand up over here yes sir examples of entities that have already migrated to Wyoming probably the most prominent is IO HK Charles hoskinson's commercial venture literally Radames filed from Hong Kong to Wyoming they didn't change it used to be input/output Hong Kong and I tease them they should be input/output yoy o instead of IO HK but they're not going to read they're not going to change their name I guess probably the most prominent one that's knocking on the door I'm not revealing anything that's that's confidential here is cracking by the way we have a the Whammy blockchain Stampede is September 19th through the 22nd the hackathon is the 20th through the 22nd so it's a third weekend of September in Wyoming Kraken is the lead sponsor all the companies that are showing up in and around that are kicking the tires on why homie shall we say including IO HK is also one of the big sponsors you're gonna see a big crackin team come because we're doing the taskforce meeting on September 19th and 20th so yeah stay tuned yeah yes yes so history a question is how does the money transmitter law worked with the token taxonomy in Wyoming and the history is the original money transmitter law required but before I got involved this is why I got involved by the way I was donating appreciated Bitcoin to the University of Wyoming and discovered they couldn't take it because the money transmitter law prohibited it it didn't prohibit it technically what it did was it required that the money transmitters in Wyoming have to hold a dollar-for-dollar reserve in addition to the asset itself which of course made it on economic because they would have had to basically be 200% reserves which made no sense right so the coin bases and circles of the world pulled out of Wyoming in 2015 and that's what got my whole involvement going I was like guys we got to fix this and then the snowball picked up snow as it rolled downhill proverbially and we did all this so so so what we did would we fixed it it was the first law actually that I don't know if I can go backwards yeah I can exempt virtual currency transactions from Wyoming's money transmitter law basically the whole virtual currency tech that whole that whole grouping is exempt from the money transmitter law so digital securities are of course still subject to the securities law and then four and then utility tokens have their own regime they're also exempt for money transmitter so basically in this industry almost certainly you don't need a money transmitter law unless you are also dealing in fiat so coinbase ended up needing to get a money transmitter license in the end because they actually off the offer fiat on and off-ramps but if all you're doing is is dealing in virtual currencies then under Wyoming's regime you don't need a money transmitter license that's the way it works yes yes yeah a great question is for to review for the for those listening in remotely after HP 126 authorize a serious LLC's and the question is does this allow token holders to be members of a series and potentially lead to dowse that is exactly one of the applications of series LLC's the history of a series LLC is basically you've got a parent and you've got children almost all of the open source software foundations are set up a series LLC's I believe Linux Foundation is set up that way because they want that they want to create they want to ring fence the liability of all of the applications of the code which is owned by the foundation which is the parent and that's where they usually the MIT license is and then everybody who's using it sets up you know a child LLC off that parent it's also heavily used in real estate but we knew it would be used in this industry as well and there are people who have looked at actually setting up their their project as a series LLC and having each of the individual members have their own series LLC hanging off the parent I'm not aware of anybody who's done that yet but again I'm not a gatekeeper and Wyoming doesn't keep that information so it very possibly could have been done and I just don't know about it the question as it relates to dowse we are talking about that in our task force now because we've had a lot of people come to us and say why do you need human beings to be involved in these organizations why can't we create a doubt that's recognized under the law and we looked at that and said actually I think the better way to go is to remove criminal liability for the developers who contribute to such projects it actually is a broader application a broader protection because a dhow by definition will be open source and we'll have developers contributing to it and so if the only people involved with a dhow are the developers who write th code and contribute to the code then if we take a liability for those developers off we don't need to do anything else so that's the direction we're going now the series LLC's you have a human being there has to be a human being involved with all those business and - deforms right now a corporation an LLC a limited partnership statutory foundation they're a whole bunch of different versions a series LLC does have to have a member it has to have an organizer so there has to be a human being involved with it so yeah but but it could be a foundation absolutely I think in a way it's kind of like the way the Swiss foundations work that so many of these projects got set up under including Facebook Libre they all went to Switzerland and and set up Swiss foundations to own the open source code but they didn't set them up as series LLC's this just gives a ring fencing of liability for those who actually create applications I'm looking at Pamela I do we have time for one more question one more question about the new legal definitions of Forks that is actually going to be published the the rule should be finalized as soon as literally tomorrow so you'll see I'll probably write a forbes.com piece about it and it's pretty detailed but what it turns on is first you have to have if you're a digital asset custodian in Wyoming but that you have to have a contract with your customer that clearly defines the source code by reference to its github code version and so once you clearly define the source code for the asset so that's the asset that you're custody is something that subject to that source code anytime you have a material change to the source code that's when it triggers the the three different categories of notice requirement and there's only one requirement where you actually have to get consent from the customer and that is where the originally contracted source code is no longer going to be supported by the financial institution so that's how we we made it made it clear that all these sort of you know crazy Forks that nobody's supporting the financial institution doesn't have to support that fork that's how we prevent spam basically they just have to if they if the source code if the consensus mechanism in the source code changes that's when they have to go and there no longer gonna support the original they're breaking their original contract if they don't do that and they were allowing them to break the contract but they have to go get the consent of the customer to do that otherwise they have to give the asset back to the customer all right thank you guys great questions you