Surprise! Wyoming is the highest-ranking hub in the United States. CoinDesk’s Crypto Hubs criteria 2023 were based on national criteria, which means that all U.S. hubs suffered from a middling score in crypto regulatory, a factor included in the drivers category, and the criteria with the highest weighting – 35 percent – out of the total. Fortunately, the highest score in our sample for crypto adoption (another driver criteria) partially offset this negative. Wyoming, which was ranked second in the U.S. for adoption and regulatory scores, a factor that is based on country, stood out from the rest of the pack due to its high quality-of-life (at 15% – the second most weighted criterion, and a part of the enablers section) and individual measures. The state with the least population in the U.S. benefited from its staggering per capita figures for crypto, Blockchain and Web3 companies, events and jobs.

To learn more about the criteria we used and how they were weighted, please visit: Our Methodology for Ranking CoinDesk’s Crypto Hubs in 2023.

(Ian Suarez/CoinDesk)

Wyoming, the state with the fewest people in America, has launched a campaign to make it its most crypto-friendly.

Since 2016, Wyoming has passed 35 laws that regulate one aspect or another of the crypto-industry. Steve Lupien said that the work is bearing fruit.

Lupien, a CoinDesk reporter, said that “we’re seeing many companies moving to Wyoming. Last time I checked, there were more than 3,000 Wyoming-based companies, and it is likely that there are even more today.”

He added that these companies bring well-paying jobs in the tech sector. Lupien, a professor at a Wyoming university, has seen many of his students leave the state over the years. (70% of University of Wyoming graduate’s end up leaving Wyoming). Now, however, there’s a way to reduce that brain drain.

He said, “It allows my graduates to work in digital assets without having to leave the state.” “A number [of my graduates] are now working in Wyoming companies or [have] founded Wyoming companies,” he said.

Lupien believes the regulatory certainty that is lacking in the United States is what draws crypto businesses such as the major exchange IOG and Kraken (formerly IOHK which was the organization behind Cardano).

Wyoming’s business and cultural scene is not as vibrant as other crypto-friendly destinations such New York, Austin, or West Coast tech hubs. It has passed crypto legislation at an unprecedented pace.

Wyoming passed legislation in 2018 exempting utility tokens from securities regulation. This resolved the biggest legal challenge facing the U.S. cryptocurrency industry. Tokens are exempted if they’re sold and issued to buyers for “consumptive purposes,” which means, that the tokens will be used to exchange for goods or services.

Later, other laws exempted cryptocurrency-related activities from the purview of the state money transmitter law, allowed companies to maintain their corporate records on blockchains and exempted virtual currencies from the state property tax, among other things.

State has recognized a new type of bank, special purpose depository institution(SPDI), which is a regulated custodian of crypto assets. The SPDI status has been granted to a few firms, including Kraken, a crypto exchange, and Custodia Bank led by Caitlin Lang, aka the crypto evangelist.

Wyoming also offers a boost to crypto: In bankruptcy proceedings, crypto is treated the same as cash. This means that, just like cash, crypto is free of any legal restrictions. Lupien noted that this would give clarity when crypto companies fail.

The state passed the Wyoming Stable Token Act earlier this year. This act authorizes state authorities to create a stablecoin that is backed by U.S. Treasury Bonds or dollars. The stablecoin will be released at the end this year and give Wyoming some notoriety, said David Pope. He is the co-founder and former member the Wyoming Legislative Blockchain Task Force.

Wyoming’s House of Representatives has passed a bill in February that prohibits forced disclosure of crypto keys by U.S. courts.

Fighting the Fed

The ongoing legal battle over SPDIs is one thing holding Wyoming back from a bright future in blockchain. Custodia is leading the fight, as it was recently denied Federal Reserve banking services. Custodia is unable to perform its banking functions.

Wyoming crypto advocates are confident that Custodia’s case will be won and that, as soon as this happens, crypto businesses will rush to the one state that offers specialized banking with crypto banks that have been fully reserved. Pope predicted that “it will snowball.”

Apart from bitcoiners, other people may find this banking alternative attractive.

Lupien stated that “if Custodia wins, Wyoming will become the center of digital asset banking, because four Wyoming SPDIs are waiting, ready to go as soon as Fed relents and the court makes them do so,” Lupien explained. Kraken Financial is another SPDI, as are Commercium Financial and Wyoming Depository and Trust.

Local crypto influencers and entrepreneurs, as well as miners and lawyers who cater to the industry are part of the local community. Lupien explained that at a Wyoming meetup in a Cheyenne coffee shop, “you would see a mixture of people such as business leaders, accountants and lawyers, along with enthusiasts.” Cynthia Lummis, “Crypto queen” (R-WY), is the state’s representative in the U.S. Senate. She co-authored a bipartisan bill called “Responsible Financial Innovation Act“, which aims to create a regulatory framework.

Pope said that while the average Wyoming resident may not have felt the impact of Wyoming’s crypto-friendly state, “future generations will definitely feel it.”