Wyoming's New Crypto Banking Law Could Defang New York's BitLicense

One of those laws allows Wyoming to charter Special Purpose Depository Institutions, a new type of fully-reserved fiat bank that can also custody crypto assets.

With an SPDI, crypto exchanges and other startups could operate in New York without going through the state's licensing rigmarole, under the same legal principles that exempt banks from needing state money transmitter licenses, Wyoming advocates said.

"We are fairly confident that the Wyoming SPDI will be able to operate in New York without a BitLicense," Chris Land, general counsel of the Wyoming Division of Banking, said Tuesday at CoinDesk's Invest: NYC event in New York.

The New York Department of Financial Services, which created the BitLicense in 2014, did not answer requests for comment by press time.

In addition to addressing the BitLicense problem, an SPDI could ease a longstanding pain point for crypto businesses: the difficulty of obtaining banking services.

"The significance is that crypto companies won't need to rely anymore on the few traditional banks that have been willing to bank the industry," she said.

The handful of crypto-friendly banks in the U.S. includes Silvergate in California and Signature and Metropolitan Commercial in New York.

As part of the "Far-reaching impact" of the SPDI, Long said she is optimistic the NYDFS will view the bank charter as trumping the BitLicense since banks have higher capital and regulatory requirements than money transmitters do.

"The Wyoming SPDI would need to apply to NYDFS to open a branch in New York and NYDFS would need to approve the application, but there's a lot of favorable case law precedent," said Long, a former Morgan Stanley executive.

After she spoke alongside Land on Tuesday's panel, she said, "Multiple New York attorneys came up to volunteer pro. bono. to help the Wyoming Banking Division litigate if it ever comes to that."