How Wyoming become the unlikely Bitcoin capital of America

Earlier this year, US Senator Cynthia Lummis of Wyoming, a 66-year-old who was born on a cattle ranch, temporarily changed her Twitter avatar to feature glowing red laser eyes in honour of Bitcoin. The gesture was a nod to the insular world of cryptocurrency, where many of the faithful have vowed to swap their pictures until the price of Bitcoin hits $100,000, in a meme known as #LaserRayUntil100K. It’s the latest, slightly bizarre marker of Wyoming’s unlikely ascendance in recent years into a cryptocurrency hub, far from the buzzing fintech centres of New York and San Francisco.

Wyoming has always been a little different from the rest of the US. It was the first state to grant female suffrage, and its contemporary politics are deeply libertarian. It is home to some of the world’s most spectacular public lands like Yellowstone National Park, and it is also the nation’s top coal producer. Its nickname is the Equality State, and its high proportion of ultra-wealthy landowners and tourists have made the city of Jackson Hole the single most unequal place in the country.

But it was this combination of an extractive economy and an independent spirit that allowed crypto to first take root in Wyoming about five years ago, according to state senator Chris Rothfuss, co-chairman of the state’s Committee on Blockchain and Financial Technology. He and a fellow representative had received a request from a constituent to look into Wyoming’s crypto laws, since they were having a hard time using certain crypto products in the state. As the senator explored more, he realised the burgeoning, decentralised technology could be a major boon to the state’s economy.

“Wyoming as an energy producing state, and as a mineral extracting state has some challenges ahead. Our economy has been reliant on coal, oil, and gas, as well as our state revenue, for decades, as long as I’ve been alive,” he told The Independent. “We understand that the future of Wyoming must rely on a diversified economy that is forward-looking instead of this backward looking reliance on hydrocarbons.”

Crypto could be the next big thing, he thought, but the state’s laws were not anywhere close to being ready to handle the ever-changing world of digital finance. Not that the rest of the country was much better.

“As we looked into it, we learned, we had just horrible laws and statutes when it came to cryptocurrency, digital assets, anything in that space,” he added. “We were about as bad as you could be, but no other state in the country had anything resembling a blueprint for how you would handle it.”

In 2017, the state formed a blockchain taskforce, and it began holding hearings with cryptocurrency stakeholders. Caitlin Long, a Wall Street veteran and Wyoming native, also became an influential backer, including endowing a scholarship for female engineers at the University of Wyoming using cryptocurrency, as well as founding a crypto firm of her own, Avanti Bank & Trust. A raft of new crypto-friendly laws followed the push. Fast forward to 2021, and Wyoming has at least 24 different crypto laws, handling everything from banking, to courts, to “smart contracts,” to payment processing, to exempting digital asset companies from most taxes. (Wyoming already lacks a personal or corporate income tax).

Major crypto firms like Ripple, a payment company valued at $10bn, and Kraken, a crypto exchange valued at $4bn, have set up operations in the state. And Wyoming is home to a number of novel financial institutions, including the first state-chartered crypto banks, Avanti as well as a subsidiary of Kraken, as well as American CryptoFed DAO, the nation’s first legal decentralised autonomous organisation (DAO), a parallel, crypto-based monetary system governed by machine learning and token holders, which began operating on 1 July.

“Wyoming is leading the way on forward-looking financial services regulation and shares many of the same values as the crypto community in terms of individual freedom and liberty,” David Kinitsky, CEO of Kraken Bank, told The Independent in a statement.

Others point to the state’s long-running reputation for being business- and tech-friendly.

“Wyoming was the first state in the union to recognise the LLC status in the 1970s. Since then, we have seen a burgeoning of technology and our state legislators really had the innovation and the foresight,” said Marian Orr, CEO of American CryptoFed DAO and former mayor of the city of Cheyenne. "From an infrastructure standpoint, I’ve really been watching how Wyoming has grown itself to be a player and a tech hub. We have the right kind of temperature. It’s cool here. It’s windy. We have everything that’s really good for technology.”

Microsoft, for example, has a major data centre in Cheyenne.

Whether all this excitement really does change Wyoming’s economy is an open question though. The companies themselves have certainly done well. Avanti, the crypto bank, closed a $37m funding round in April. Beyond filing fees, crypto currencies hardly add any taxes to the state coffers, and the decentralised nature of digital finance means even successful Wyoming-based crypto firms won’t need a large in-person presence.

Senator Rothfuss pointed to Kraken as perhaps the state’s biggest crypto employer. It currently has five employees in the state, though it told The Independent it plans to “at least double that headcount in the near future,” as well as invest in community through sponsorships and conferences.

“Over the next few years, we will be looking to grow Kraken’s footprint and develop a proper FinTech and crypto ecosystem in the region,” it said in a statement.

American CryptoFed DAO’s CEO is its main Wyoming-based employee.

“It’s not so much about a large executive team or hiring a lot of people, but about a growing economy where everyone is part of the governance structure,” Ms Orr said. “You’re not paying lots of salaries. You’re essentially creating an economy where everybody gains and everybody grows.”

Lee Reiners, executive director of the Duke University Global Financial Markets, told Slate that he felt the state had been “totally hoodwinked by all these crypto people.”

There are also climate concerns. A recent Cambridge University analysis found that bitcoin mining, the hyper-complex computer processes used to unlock new cryptocurrency supply, uses more energy than the whole of Argentina.

On this matter, some in the state have come up with a distinctly Wyoming solution: hooking crypto-mining rigs directly to natural gas wells, which often “flare” natural gas into the air before they’re connected to a natural gas pipeline.

It combines the old, the new, and a healthy dose of rugged individualism, and for that reason, it couldn’t happen anywhere else.