USA – WYOMING Trends and Developments Contributed by: Bob Cornish, Law Offices of Robert V. Cornish, Jr., PC
of 1940. Likewise, in the case of a non-client of a bank or a “client of a client” (eg, an exchange holding digital assets of its own customer), the bank must be named as an agent or trustee of the digital assets. Custody in a suitable bail - ment structure is to be chosen by the client, including but not limited to the ability of the custodian to honour written transaction instruc - tions from that client. (c) Wyoming banks that choose to custody digital assets must take reasonable steps that transactions undertaken on behalf of custom - ers to purchase or sell such assets adhere to concepts of “best execution”. That is, a bank must take into account the mark-up/mark- down, commissions and services provided by a broker-dealer or exchange to ensure that such transactions are consummated as economi - cally as possible. Banks must also have sound valuation methodology for digital assets from reliable sources. (d) Custodians and their clients are to agree on the protocols for maintenance and application of block source code in the event of “forks” of digital assets. Custodians will have an obliga - tion to inform clients of “forks” and their intent to custody assets under old block source code versus new block source code of “forks”. (e) Agreements for custody of digital assets by banks in Wyoming must (i) designate Wyoming law to apply, (ii) designate Wyoming as the venue for the resolution of any disputes, (iii) agree that all transactions are deemed to have taken place in Wyoming and (iv) agree that as - sets in custody at the bank are indeed located in Wyoming. (f) Assets (keys) are generally to be held in “cold” storage unless “hot” storage is needed to fa - cilitate a transaction by a customer. In order for “cold” storage to be deemed lawful custody, a bank must have physical security that re - quires at least two authorised key holders with security badges and at least two of the follow - ing multifactor authentication methods, those being (i) personal knowledge via a login or PIN, (ii) an access card or other computer program and (iii) biometrics. Access to the physical storage facility shall be limited to authorised
persons through multifactor identity verifica - tion, which shall be annually verified by the independent public accountant, consistent with industry best practices. Prospective employees involved with these tasks will need to submit to background and security checks. (g) The cash balances of clients whose accounts hold digital assets may be invested in, among other things, (i) debt securities rated AAA and above and (ii) gold. Cash balances are not lim - ited to being traded in US treasury securities. • Wyoming specifically authorises banks (including SPDIs) to hold digital assets in custody under their charter trust powers and in accordance with Rule 206-4 (2) of the Investment Advisers Act of 1940. With recent streamlining of UCC provisions to address digital assets in the United States, Wyo - ming is a favourable jurisdiction for those lending or securing funds through digital assets, as well as for swaps and derivative instruments. • Those entrepreneurs in the blockchain industry who may require special treatment or waivers of unclear regulation in Wyoming can now seek to avail themselves of a “regulatory sandbox”. Use of the “sandbox” will require applications to state agencies that may have interests in the requested waiver, including the Wyoming Banking Commis - sion and the Wyoming Securities Commission. The “sandbox” will provide a two-year period of relief from legislation for those ventures, all of which must be domiciled and operating within Wyoming. • Wyoming has legislation authorising and permitting the creation of digital assets that represent certifi - cated shares of stock. A “certificate token” under this legislation has been defined as “a representa - tion of shares” that is (i) entered into a blockchain or other secure, auditable database, (ii) linked to or associated with the certificate token and (iii) electronically transmittable to the issuing corpora - tion, the person to whom the certificate token was issued and any transferee. • Given that Wyoming utilities produce some of the cheapest and most abundant electricity in the United States, Wyoming has, through HB 113, enabled those utilities to negotiate power rates with blockchain companies (including miners) and others without approval from Wyoming’s Public Utility Commission.
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