MAG Insights

Announcements from the MAG & Featured Articles

MAG Board Member Corner: Crypto-Currency (MAG Quarterly- Volume Eight, Issue Two)

Dean Sheaffer
By Dean Shaeffer, SVP Financial Services/Chief Compliance Officer, Boscov's

July 1, 2020

One of the things that the MAG does best is monitoring, educating and advocating on payments system changes.  In that light, we have created several Communities of Practice (“COPs”). For some time, I have had an interest in crypto-currency and work with several other MAG members on our Crypto-COP to better understand the quickly evolving crypto-currency and block-chain landscape. 

From my perspective as a Board member, I encourage all MAG members to consider joining a COP that aligns with your interests.  A list of MAG COPs can be found on the MAG website. 

To say the crypto-currency ecosystem has been “fluid” or “dynamic” would be an understatement.  Quite frankly, it has been the wild west.  And – interestingly – Wyoming is trying to corral this bucking bronco. 

Earlier this year I had the opportunity to meet in Laramie, Wyoming, with key legislators, economic development leaders, attorneys and others to learn more about the Wyoming crypto-currency initiatives.  In short, legislators have taken (and continue to take) action to make Wyoming extremely attractive to private crypto-currency and block-chain enterprises. The legislators seek to develop public-private initiatives to encourage crypto-currency and block-chain companies to make Wyoming their home.

Some highlights of the Wyoming laws 1:

  • Recognizes direct property rights for individual owners of digital assets of all types (virtual currencies, digital securities and utility tokens) and applies the super-negotiability rules of commercial law to virtual currencies — which fosters their liquidity.
  • Creates a fintech sandbox to provide regulatory relief to financial innovators from existing laws for up to three years.
  • Sets up a new type of state-chartered depository institution to provide basic banking services to blockchain and other businesses. The bank is required to have 100% reserves, cannot lend, is for business depositors only, and FDIC insurance is optional. Such banks could be operating as soon as March 31, 2020.
  • Authorizes the first true “qualified custodian” for digital assets which is a bank. Wyoming banks could start such operations as soon as September 1, 2019. These new custodians won’t be like traditional securities custodians, because for Wyoming-based custodian investors will still directly own their digital assets under custody as a bailment, which means they retain direct ownership while merely giving up control.

I believe Wyoming is on the right track.  They have developed some of the most advanced block-chain curricula in the U.S. and have active, superior programs at the University of Wyoming (also in Laramie).  They have the motivation and means to create a truly unique environment that will push block-chain and crypto-currency initiatives into the main stream. 

So…what does all of that mean for our businesses?  To me, this is one more way the world will change.  Will block-chains become the de-facto standard for tracking significant assets and transactions?  Will crypto-currencies become commonplace methods of payment for B2B and/or B2C transactions?   Certainly, the actions Wyoming has taken, and continues to take, make these changes and many others more likely. 

The MAG’s Crypto COP will continue to monitor the crypto-currency and block-chain ecosystem and report to the MAG membership significant updates and opportunities.