Coinbase, a bitcoin wallet and exchange service company with operations serving more than 2.5 million users in 190 countries, has announced the suspension of all operations in Wyoming as a result of state financial regulators’ interpretation of the Wyoming Money Transmitter Act.
As state regulators currently interpret the law, exchanging Wyomingites’ fiat currency for bitcoins or depositing bitcoins in Coinbase “wallets” requires state financial licensure and the maintenance of a dedicated fiat currency reserve at least equal to the dollar value of all bitcoins held for all customers.
‘An Unworkable Environment’
Mercatus Center Technology Policy Program Manager Andrea Castillo says Wyoming’s banking policies are holding back innovative digital businesses like Coinbase.
“It is unfortunate for Bitcoin users in Wyoming that their state’s regulatory policies created an unworkable environment for Coinbase,” Castillo said. “The requirement that virtual currency businesses must keep a 100 percent fiat reserve of customer assets is indeed onerous.”
Instead of trying to fight the march of progress, Castillo says Wyoming regulators should try to accommodate bitcoin-based businesses.
“Wyoming would benefit by tweaking its money transmitter regulations to more harmoniously apply to the specifics of virtual currency firms,” Castillo said.
Regulations Squashing Innovation
Mark Thornton, a senior fellow at the Ludwig von Mises Institute, a nonprofit think tank dedicated to research and education about classical liberalism, says Wyoming’s banking regulations are squashing innovation in financial services.
“The State of Wyoming’s decision to require Bitcoin wallet service providers to hold 100 percent fiat currency reserves against all bitcoin deposits is clearly impractical and unnecessary,” Thornton said. “It would seem that this is a deliberate attempt to suppress the use of bitcoins in Wyoming, or it might be the work of a lazy or ignorant bureaucracy.”
D. Brady Nelson ([email protected]) writes from Washington, DC.