What It Takes to Get a Crypto-Friendly Bank Charter in Wyoming

It's been more than three months since Wyoming began taking applications to charter a new type of crypto-friendly bank, and no company has announced its application while a handful of firms have indicated an intent to apply.

Currently, the Wyoming Division of Banking is developing partnerships with other state regulators to create joint legal procedures around digital assets, according to a spokesperson for the Wyoming Division of Banking.

"Once you go into the formal application process, everything has to be pretty well prepared to have the full scrutiny of the Wyoming Banking Commission," said Jeremy Dzral, co-founder and CEO of WYo Financial, a newly formed corporation in Wyoming that plans to apply in Q1 2020 and be full-fledged SPDI in Q3 of the same year.

The Wyoming Division of Banking would be the SPDI bank's primary regulator, not the risk-averse U.S. Federal Deposit Insurance Corp. The bank would also gain a master account at the Federal Reserve Bank of Kansas City, which would potentially allow it to deposit funds at the Federal Reserve as well as have access to the global payments system.

While the statute that ratified the SPDI charter required $5 million and three years of operating expenses at the time of application, the Wyoming Division of Banking has decided to require a minimum of 1.25 percent to 1.75 percent of proposed assets under management or assets under custody or $10 million, whichever is greater.

These capital requirements are designed not to prevent a run on a leveraged bank - SPDI banks are required to keep all of customers' fiat demand deposits as liquid assets and cannot lend - but to be in effect in case the SPDI bank fails.

While SPDI banks don't have to deal with the FDIC, the Wyoming Division of Banking will now have to play the FDIC's role in case of bank liquidation.

In a bank failure scenario the Wyoming division of banking would have to contact depositors, arrange for their assets to be returned, hire accounting firms to audit the books and manage the assets while the estate is being settled and cover any litigation costs against the state resulting from the failure.

The rules go on to point out that a SPDI bank may resemble a custody bank with a focus on fiduciary activities, asset management and custody.

SPDI banks may also have opportunities to bank other high-risk industries that were affected by Operation Choke Point like the firearm industry and coal industry, said David Pope, president of the DPACPA group of accounting firms and a volunteer advocate for the Wyoming Blockchain Taskforce.