In recent years, Wyoming created some of the most attractive laws in the country for establishing blockchain and cryptocurrency companies in our state. But by allowing the laws to be shaped and written by those who benefit from them, our legislative hard work accomplished everything the blockchain industry wanted but nothing the state needs. Namely, jobs and revenue.
Blockchain is a way to keep track of who has owned something throughout time. For example, a cow gives birth, the newborn eats some Wyoming grass, travels by truck to Nebraska, and eventually ends up in a hamburger at an Orlando drive-through. With blockchain, we know the history of that Double-Cheese Whopper, and should it contain E. Coli, that might be useful to the CDC. In the case of cryptocurrency, “money” is created (e.g. bitcoin), and just like the cow, that currency is tracked in a massive excel spreadsheet in the sky.
It’s a booming industry and crypto fans cite South Dakota’s experience with credit card laws as an example of how attracting the financial sector through favorable laws and rules can help a state like ours.
In the late 1970s Citibank was losing enormous sums on their credit card operations because they couldn’t charge a high enough interest rate. Lawmakers in South Dakota, a state on its ear financially, realized they could solve Citibank’s problem by crafting regulations that would allow a bank in South Dakota to charge whatever it wanted to a customer in Los Angeles. Knowing this, the governor of South Dakota, Bill Janklow, told Citibank it would get the legislation it wanted, but only if Citibank promised to move at least 400 credit-card-processing jobs to South Dakota. Citibank agreed, along with Bank of America and others, eventually creating 20,000 well-paying jobs for the state.
But unlike credit-card processing, blockchain doesn’t open envelopes, answer phones or process checks. Instead it stores data on microchips which keep getting cheaper and easier to read from anywhere in the world. Blockchain doesn’t create many jobs and the few it does create appeal to the kind of workers who want to live in London, not Rock Springs.
Consider Kraken, the first company to take advantage of our new laws. The company domiciled its banking operation in Wyoming to great hoopla. But renting a post office box in Cheyenne does not create jobs for former trona miners or rail workers. Today, Kraken’s website lists over 100 job openings in cities such as London, Singapore and San Francisco — as well as many remote opportunities. Out of all those jobs, only one is listed in Wyoming, and in bold print the application states: “Relocation to Wyoming is an option.”
Beyond insisting on jobs, South Dakota was not afraid to charge companies a fair price in return for a favorable business climate. As Gov. Janklow explained, “We had a 5 percent tax on the profits from these companies. They make $500 million, we get $25 million. That’s a lot of money in South Dakota.” , If Janklow and the South Dakota Legislature were going to create value to banks in New York, they wanted something in return.
But unlike South Dakota, Wyoming let industry write the legislation, and they chose not to charge themselves. As co-founder of the Wyoming Blockchain Coalition, Caitlin Long, (who also founded her own cryptocurrency start-up Avanti), helped write the legislation.
In her article for Forbes, Long boasts about Wyoming: “Basically, there are none [fees or taxes] at the state level—in most cases! … At the state level, Wyoming has no personal income tax, no corporate income tax, and almost none of the other “gotcha” taxes that frequently hit businesses domiciled in other US states, such as franchise taxes or gross-receipts taxes.”
Unlike South Dakota and its wily governor and state legislators, we forgot that the goal was not to help billionaires in California or Teton County, but to help everyday Wyoming communities.
Today we’re one of about a dozen states that have passed favorable legislation for blockchain and cryptocurrency companies, and our only advantage is that we don’t ask for anything in return — not jobs or revenue.
This won’t do a thing to help Gov. Mark Gordon offset the next $500 million in spending cuts on their way to our schools, roadways, healthcare system and those worker needing re-training.
Don’t get me wrong, I think there’s a decent chance some people will make a lot of money off our legislation, but it won’t be folks living in Rawlins or Evanston.
David Dodson is a resident of Wyoming and an entrepreneur who has helped create over 20,000 private sector jobs. He is on the faculty of the Stanford Graduate School of Business where he teaches courses on small business and entrepreneurship. He is a frequent guest on Fox Business and a guest for small business issues on CNBC.