Wyoming residents Caitlin Long and Chris Land drop a bombshell at Consensus Invest, a blockchain industry event in Manhattan on November 12. They do it rather quietly, on a minimally attended panel Long moderates called “Beyond the Vault: The Legal Aspects of Crypto Custody.”
The panelists include general counsel of crypto exchange Kraken Mary Beth Buchanan, former SEC commissioner Annette Nazareth, and Land, general counsel at the Wyoming Division of Banking. They spend most of the panel exchanging legal jargon with digital asset expert Long, who spearheaded the Wyoming Blockchain Task Force’s efforts – where Land was also counsel – until it dissolved this September. The Task Force had realized its goal of making Wyoming the country’s most crypto-friendly state.
“This is untested,” says Land, “but we are feeling confident that the Wyoming Special Purpose Depository Institutions will be able to operate in New York without a BitLicense.”
It takes a second for this to sink in. Then Long, who’s practiced at translating concepts to make them relevant for her current audience, spells out exactly what this means: “It’s not likely that a digital asset company operating in New York will have to have a BitLicense if they have an SPDI charter and open a New York branch of the Wyoming state bank.”
In other words, she and Land have essentially come up with a loophole for crypto asset companies operating in New York without a BitLicense, which they’d otherwise need to function legally in the state. Obtaining a BitLicense requires an arduous and slow application process that has driven some crypto companies, like Kraken and ShapeShift, out of New York. Only 18 companies currently hold such a license.
SPDIs do more than offer a possible circumvention around a BitLicense. They let companies custody crypto assets. They also lay the groundwork for crypto companies to more easily access banking services and follow regulations, allowing them to protect their assets and even file taxes with less friction. Every U.S. state should be able to recognize Wyoming-chartered SPDIs as legal banks.
This is a game changer. Currently, only three U.S. banks offer services to crypto companies, and none of them take custody of or make transactions with digital assets, like SPDIs will. The panel audience, until now in danger of drifting off after an ample lunch, snaps to attention and applauds.
This is not the first time Long has helped Wyoming make a splash this year in the blockchain world. The SPDI legislation is part of a sustained effort by the state, with the cheerful and well-spoken Long at its fore, to put itself at the head of this growing industry. Long has pursued this goal doggedly ever since trying and failing to donate bitcoin to her alma mater, the University of Wyoming, in 2017. The state’s money transmitter law wouldn’t allow it.
To Long, this was ridiculous. She didn’t see why her state made it so hard to use cryptocurrency. Unattached to any government, cryptocurrency should have appealed to Wyoming, which generally embraces minimal government interference and espouses libertarian ethics. “We have a true history of independence and taking on the Feds,” Long says, and you can tell she’s proud.
Privacy and property ownership are a big part of Wyoming’s brand of independence. This dates back to a conflict known as the Johnson County War in the late 1800s, a sort of Wild West turf war that – to simplify – pitted open-range cattle grazing against private pasture owners. Private owners won.
Long calls the conflict “a miniature civil war fought over that boundary issue in the physical realm,” she says. “In a way, we're picking that fight in the financial realm, because in the financial realm, there isn't a place that recognizes clear property rights because the securities law is done at the federal level, and the securities industry captured the SEC.”
Long’s plan is to attract blockchain businesses and jobs to Wyoming. She acknowledges this aim stems from personal interest, making some see her unpaid position on the Blockchain Task Force, which has worked on state legislation since its April 2018 inception, as ethically questionable. For instance, she owns bitcoin, and she’s helped create laws and host events, like the WyoHackathon, to bring businesses into the state – businesses like the 2019 Hackathon’s main sponsor Kraken, in which Long also invests.
But Long is transparent about all this, and having spent time with her, it’s near impossible to see her as conniving. Sure, she’d be capable – she’s usually the sharpest person in the room, and her particular brand of cowboy friendly enthusiasm is so ever-present it could be construed as an act. After all, she worked on Wall Street for 22 years, which requires an edge the type of person who’s never left Wyoming likely couldn’t muster. Yet no one I spoke with had a negative word to say about Long. She radiates warmth and appears genuinely straightforward about her love for her home state. You can’t help but feel that the tireless work she’s doing, she’s doing for Wyoming over herself.
So far, she’s done a lot. Wyoming’s Blockchain Task Force has passed 13 bills in the state legislature – far more than any other U.S. state can boast. Businesses like IOHK, the blockchain-building company behind cryptocurrency Cardano, moved from Hong Kong to Cheyenne in early 2019, while others like BeefChain, which uses RFID and blockchain to track cattle, started up in the state. Representatives from Florida, Georgia, South Carolina, New Hampshire, Vermont, Colorado, Utah, Montana, South Dakota, Arizona, California, and Iowa have all consulted with the Wyoming legislature about its blockchain bills.
Federal lawmakers have looked to Wyoming, too. Wyoming’s legislative push set a precedent for the Token Taxonomy Act, a comprehensive utility token bill introduced in Congress (and the first federal law Land’s written). Even presidential candidate Andrew Yang has a campaign promise to “work with Wyoming legislators” on laws that lend clarity to the crypto space, “largely modeled after their work.”
There are many reasons why Long is the ideal person to publicly spearhead Wyoming’s effort. First, it’s her home state. Long is able to act as a bridge between the rural West and the metropolitan hubs that house most of the blockchain industry. She’s spoken about Wyoming’s strides in the space at “probably more than 100” industry events and podcasts this year alone.
Then there’s her ability to articulately and concisely sum up anything from the 2008 financial crisis to the SEC’s views on cryptocurrency, allowing her to converse equally easily with C++ fluent developers and bolo tie-wearing ranchers on the Wyoming legislature. A combination of confidence and eloquence lets her walk through blockchain industry events and legislative committee hearings like a low-key celebrity – tall and smiling, she greets everyone with sincere good will, serving up deep knowledge without flaunting it. She’s also dedicated.
“Caitlin has just an insatiable thirst for knowledge and debate and learning and ideas,” says Land. “She's also able to focus in like a laser beam on certain things, and then she doesn't let go until she's figured it out.”
At the Marriott bar after Long’s Consensus Invest panel, people from all walks of crypto company wait their turn to approach her. Two men ask her about their stablecoin, followed by people with businesses in the UK and Switzerland. “Is it safe to come back to the U.S.?” one asks.
Long answers them all readily, but invariably directs them to the “mastermind” behind the legislation – Land, who researched and drafted nearly all of Wyoming’s blockchain-related bills to date. Before we met in person, Long mentioned Land on the phone several times, calling him the “unsung hero” of Wyoming blockchain legislation and insisting he get credit for the work they’ve done out West. Consensus Invest would be his “unveiling,” she said, where she’d pull back the curtain to reveal this legal-minded Wizard of Oz. Despite all the work she’s done, Long isn’t keen on hoarding praise.
For the soft-spoken Land, entering the public blockchain sphere also meant seeing Long in a new light. “My interactions with her have been almost always one-to-one, and seeing her public face and persona is certainly eye opening,” he says. “People tell me that she's a big deal in the blockchain space and it's just kind of unreal to me – you know some famous person, but she doesn't feel like a famous person, you know?” Over the next hour or so, Long and Land don’t move from the table where they’ve posted up. People keep coming to them.
“Some very powerful people came up to us today to talk about applying the charter in Wyoming,” Long says, her face glowing with champagne and excitement as Consensus happy hour nears its end. “It’s not like there was a new business that was unveiled or a new white paper. This is a legal regime…we seem to hit right over the proverbial plate with the people who needed to know.”
In fact, after repeated brush-offs, Land finally has a meeting scheduled with the New York Department of Financial Services Superintendent Linda Lacewell later this week. NYDFS created the BitLicense in 2014. Soon its superintendent would come face to face with the creator of legislation that could strip away some of its gravity.
Entering Wyoming on a bus from Denver, it appears as if there’s endless open pasture – but look closer. Fences separate the road from the fields, subtle but defining markings reliably cutting up the landscape and closing it from public access. “The West is fenced off,” says Long. “Everything’s owned in Wyoming.”
That’s one of the things Long loves about her home state. As she repeated frequently in the time we spent together this November, “Good fences make good neighbors.” In other words, neighbors get along better when there’s a clear dividing line between what’s theirs and what’s yours. It’s surprising to hear such an affable person says this, but Long is so pro fences, she wants to erect them around people’s digital property, too. Blockchain will provide the immutable, online ledger to help her do just that.
Long says Wyoming is poised to do for blockchain and cryptocurrency companies what South Dakota did for credit card companies in the early 1980s. The latter offered friendlier laws that courted businesses like CitiBank away from New York. “There are now 16,000 jobs in Sioux Falls, South Dakota,” she says, “and that was a rural part of the state.”
Long originally hails from Laramie, a college town not far from Wyoming’s capital, Cheyenne, where she recently moved with her partner. For undergrad, she studied political economy at the University of Wyoming, then attended Harvard Law School in the early 1990s before moving to New York City to work on Wall Street. A stint at an investment bank led to 10 years at Credit Suisse, where she was quickly promoted to managing director at age 31. Next came nearly nine years at Morgan Stanley, where she ran the company’s pension solutions group.
During this period, Long noticed that a new financial crisis seemed to crop up every three or four years, exposing a “major crack in the financial system,” she says. Most – save the dot-com bubble and the 2008 financial crisis – flew under the general public’s radar. But not under Long’s, and she didn’t like what she saw.
One day while heading Morgan Stanley’s pension business, Long was running a transaction between a pension fund and an insurance company when she learned some disturbing information. The custodian bank that was supposedly holding the pension fund’s assets didn’t have them. It had lent those same assets out to multiple people. All the bank had was an IOU.
Long ended up telling the fund’s chief investment officer to threaten the bank with an SEC call if they didn’t get the securities back in the fund. The bank obliged, averting a crisis. But this type of activity is all too common on Wall Street. “This is supposed to be illegal, but it happens every day,” Long says. She credits her honest “Western sensibility” for her inability to abide by the system’s lack of basic ethics – and for her drive to find solutions.
“Caitlin realized right away that blockchain is a technology that can make sure everyone knows where everything is in a very orderly fashion,” says Ethan Bronsnick, who worked for Long at Credit Suisse starting in 1999 and later followed her over to Morgan Stanley, where they eventually became partners in Long’s pension business. Just as Long evinces a sort of celebrity aura in blockchain and Wyoming legislative circles today, so she did in insurance and pension circles back on Wall Street. “Her ability to walk into a room and take it over – but in a very respectful, congenial way – is remarkable,” Bronsnick says.
It was during her Morgan Stanley days, around 2012, that Long first started reading about bitcoin. At first, she was afraid to express interest to her colleagues. She knew the financial establishment wouldn’t like it. But by around early 2014, Morgan Stanley had developed its own internal bitcoin group, and Long started to participate. As the only managing director in the group, Long caught the attention of Morgan Stanley’s chief technology officer. “She became the internal bitcoin person,” says Bronsnick.
Soon enough, the CTO started bringing Long into all kinds of meetings, like with crypto company Ripple and “multiple Fortune 20 companies” looking at bitcoin. “I've known since spring 2014 that major, multinational companies have been quietly using bitcoin all along,” she says, “to execute foreign exchange transactions.”
In all her time on Wall Street, however, Long never forgot Wyoming. When Bronsnick first interviewed with Long, he remembers an arresting picture of her home state’s mountainous landscape hanging in her office. “Throughout my time knowing her, she always had a really strong love for Wyoming,” says Bronsnick. “So it's great to hear she's back doing stuff there.”
A week after Consensus Invest, in a conference room strewn with phone cables at the Wyoming Banking Division, Land tells me that NYDFS Superintendent Lacewell ended up canceling their meeting. (NYDFS did not respond to CoinDesk’s requests for comment.) Wearing a Florida State jacket (his alma mater) and fiddling with his cell phone, Land delves into the origin of the charter bank that has the potential to bring crypto companies into the U.S. banking system.
Wyoming’s SPDIs are designed to have 100% reserves, meaning they’ll fully back all of their assets in fiat currency. The bill introducing them was one of the earliest fruits of the Wyoming Blockchain Task Force. The Task Force was made up of four private citizens, including Long, a lawyer named Matthew Kaufman, Stack Overflow VP of product Will Cole, and accountant David Pope, along with seven elected officials. Its chairs were bipartisan: Tyler Lindholm, the House’s cowboy hat-wearing Republican Majority Whip, and Democratic Senate Minority Leader Chris Rothfuss, who has a PhD in chemical engineering.
The Task Force has garnered criticism, particularly from Robert Jennings, a fundraiser and former Wyoming blockchain bill proponent. He recently told local news site WyoFile, “It seems to me the few people actually writing these laws and pushing them through have a personal financial interest in getting them passed.”
Lindholm, for example, is the program manager for BeefChain’s Process Verified Program, meaning he “oversees its involvement with the USDA.”He started in May 2018, according to LinkedIn, the same month the Blockchain Task Force began meeting (legislators do not get paid for their public work in Wyoming and hold day jobs).
Lindholm does not see his BeefChain involvement as a conflict of interest. “BeefChain has never taken advantage of the bills passed by the Task Force,” he says. Jennings helped found BeefChain, and is now being sued by BeefChain partners including Lindholm and Blockchain Task Force member Senator Ogden Driskill for allegedly attempting to “expropriate” the company. The WyoFile article also points out Long’s financial ties to Kraken. Kraken’s general counsel Buchanan says the company has been “very involved in the Task Force from a behind the scenes standpoint,” while various team members have participated in its meetings.
A rancher who lives seven hours away from Cheyenne, Lindholm first learned about bitcoin through Ron Paul forums back around 2012. “I’m kind of a libertarian-esque type of person,” he says, snapping his can of chewing tobacco. It’s an hour before a long day of bill hearings commences for the corporations committee, which he also co-chairs.
Lindholm got elected to the Wyoming House of Representatives in 2014 and started the following year. During that time, one concern constituents brought to him was their inability to access cryptocurrency exchanges because of the state’s money transmitters act. “There was a complete wall up,” Lindholm says. Wyoming was “the worst in the nation for crypto,” alongside Minnesota and Hawaii. Then in 2016, Lindholm ran his first piece of crypto legislation, which would allow virtual currencies to be treated “just like cash.”
“I think I got one vote,” he says. “I got smoked out of the room.”
So Lindholm learned political strategy, spending time with committee members who would hear his bills and employees of the Wyoming Banking Division, the agency that would implement them. The next year, a friend of Lindholm’s got in touch to say he knew someone “over on the East Coast” who went to the University of Wyoming and was “really smart” who could help with his blockchain bills. He blew it off, figuring it wouldn’t be much help, but the friend persisted. Lindholm finally agreed to reach out.
“That’s the first time I met Caitlin,” Lindholm says. Together, they started work on several blockchain bills, beginning with one that would exempt virtual currencies from the state’s money transmitters act. They also came up with a bill that would differentiate between utility and security tokens during the ICO boom. (Land, following Lindholm on Twitter, “knew he was getting his good ideas from someone,” which turned out to be Long.)
All of those bills passed, to very little resistance. “The coal market was tanking, and oil and gas was tanking,” says Lindholm of the state’s largest markets. “Wyoming is extremely mineral-dependent. We’re also extremely wealthy…but it was a terrifying concept that all of a sudden our biggest industries were flagging.” Presented as an “economic diversification idea,” the blockchain bills offered optimism.
The goal of economic diversification also brought lawyer Kaufman into the Task Force, which had begun forming around this time. Kaufman had been on a committee to ease Wyoming away from its dependence on carbon industries. He’d also been counseling startup and securities clients, some of whom were developing blockchain and crypto projects. Kaufman describes his first year on the task force as “putting a flag in the ground” and announcing “we’re going to play in this space.” Year two – this year – was more about “how do we respond to the industry’s problems,” he says. The SPDI bill went up in the Task Force last October.
Right before the Task Force was to vote on the bill, Long and Land spotted some critical issues. The pair stayed up all night to rewrite the entire thing, Long powered by coffee, Land by Mountain Dew. “It worked,” Land says. The bill went through.
SPDI bank legislation came about because the task force was looking for something to be “known for,” says Land. A bank was the natural answer. Though it started out as a means for cryptocurrency companies to store their assets, the task force began seeing its potential as a way to integrate digital assets into the banking system. Kaufman calls it “an infrastructure, an industry-wide service platform.”
Those instrumental in crafting Wyoming’s SPDI bill acknowledge that it’s a particularly un-sexy piece of legislation with far-reaching implications. “Nobody even knows what we did in the State of Wyoming, where we actually kicked Alexander Hamilton's gravestone,” says Lindholm (Hamilton championed the First Bank of the U.S., a centralized institution set up to regulate the economy’s supply of bank credit). “There hasn't been a 100% reserve bank in the United States since 1790.”
So far, Land says the Wyoming Banking Division has spoken with “a couple hundred companies” about applying for the SPDI charter. Most didn’t have enough money to open a bank, and one had too much, with about $100 million. The sweet spot to apply is the $20 to $30 million range, a number Land says is consistent with the amount of money other new banks raise. (Also, if an SPDI were to shut down, the Wyoming Division of Banking would be responsible for its payouts.)
By the end of 2020, Land expects there to be around five operating SPDIs. Kraken has been looking at the application for “months,” says Buchanan, adding that the company is even “seriously considering” moving to Wyoming, largely due to Long’s efforts. “Caitlin is a tremendous force to be reckoned with,” Buchanan says. “She has boundless energy and cares deeply about the development of cryptocurrency and blockchain technology.”
Financial services provider WYo Financial is another possible SPDI hopeful. Its website says that it “intends to be a Wyoming state-chartered financial services provider,” listing the services it “will” be able to offer once its SPDI application is approved.
Wyoming has a long history of principled social initiatives. In 1869, when it was still a territory, Wyoming was the first to grant women the right to vote. Though U.S. Congress tried to get Wyoming to forfeit this right to become a state, it didn’t work, and Wyoming became the first state in the union with women’s suffrage in 1890. Wyoming also first enacted the LLC in 1977 (today most new companies are LLCs).
This fiercely independent spirit, however, also prompted an every person for themselves sort of attitude in regards to property. You can see an illustration of this in the window display for Cheyenne’s Cowgirls of the West Museum. Though ranchers marked their cattle with unique brands, rustlers, aka cattle thieves, could change that original brand into markings of their own. According to the Cowgirl Museum display, a rancher named Ira Crane branded his cattle with his initials, IC. Rustlers added a “U” at the end of the brand on stolen cattle. If Crane, who apparently had a sense of humor, found his cattle and took them back, he’d simply add a “2” at the end to signify his reclamation – ICU2.
On November 18, miles from downtown Cheyenne and past both the crude oil refinery and a field full of Dish Network satellites, the Wyoming Liquor Division temporarily houses a room full of Wyoming legislators debating “branding” property in the digital realm, via a bill about “digital representation tokens.” Through a slit in the blinds, the sun is setting, and the legislators – who’ve been debating bills all day – are starting to get antsy.
Senator Charles Scott is quick to voice his concerns about the digital representation tokens bill, which would let tokens represent property titles, eventually making deeds tradeable online. . A self-described cattleman who farms and wears a bolo tie, Scott has been on the Wyoming legislature longer than anyone else in the room at 41 years. He’s wary of how new technology could affect the established ranching industry.
For instance, he asks, what if someone with “shaky finances” tries to double-sell both the cattle and blockchain tokenized deed to them, and the cattle “gets eaten”? “If that happens once or twice, it will suddenly get very difficult for the ranching industry to borrow money against cattle,” Scott says. He thinks these tokenized deeds would make it easier to commit fraud.
Rothfuss responds that yes, the bill won’t fix fraud but it might make commerce more efficient. “Whenever you can make commerce more efficient, you’re probably going to help fraud become a little bit quicker.” He brings up examples like the checkbook – checks make committing certain types of fraud almost seamless, but the checkbook “didn’t create fraud.” Similarly, blockchain innovation solves some problems, and opens up others.
Another representative expresses concern about the token asset having a different value from its underlying asset. This time, Lindholm jumps in: “What you're envisioning is that a token would gain a secondary market,” he says. “That’s why this bill exists, to prevent that from happening.” He explains that these tokens would not be security tokens that rise and fall in value by themselves, but would rather have no value separate from the properties they represent.
It’s all a lot for everyone to wrap their heads around, and the representatives are growing weary, calling each other by the wrong names and laughing in fatigue. Then Long takes a seat before the committee chairman and starts speaking fluent politician. “If you leave the blood on the floor, then that’s okay…but I think there is a powerful concept here…we have a powerful lead,” she says. “If we keep [this bill] alive, can we fix it? In time.”
All four blockchain bills presented ultimately pass in the committee. They’ll move onto the state legislature. The “digital representation token” bill gets the most no votes, and even Senator Tara Nethercott, a Blockchain Task Force member who’d been helping present the four bills to her peers today, gives it a “reticent aye.”
“I definitely want to understand all of the causes and effects that may occur,” she says of that bill once the committee’s session ends. She wants to ensure that “the types of ownership that currently exist…are able to still apply in a digital token.”
Nethercott, Lindholm, Rothfuss and a few other representatives retire to a nearby bar with Long and a couple blockchain business executives, including Emma Channing, CEO of a ConsenSys-affiliated company, who’d spoken as an industry expert during the bill hearings. “Caitlin has for two years been the Wyoming Blockchain Task Force’s road-warrioress, its most visible face and vocal member,” says Channing. “She has an extraordinary talent for listening to all [and] synthesizing that input.”
The bipartisan group jovially discusses road paving, vaping (“It’s the vitamin E that’s killing people”), and Republicans’ thoughts on Medicaid (they don’t like it until they need it). Representative Aaron Clausen proudly announces that he’s never voted “aye” on a blockchain bill while sitting next to Rothfuss (later, Long tells me he must have – some have passed unanimously). The camaraderie feels like a bipartisan fantasy in a country normally divided by party politics.
In the car to dinner, where we’re served by a man from Yonkers (Long immediately spots the accent), she says the bill hearing went pretty much as expected. One of the bills that passed would allow the now-dissolved Blockchain Task Force to morph into a full-blown committee. “The real benefit of that is that it can propose its own bills,” she says.
Having BeefChain partners on the old Task Force raises questions of regulatory capture (in which an industry’s regulators end up serving the industry’s interests) for the future committee. But BeefChain is about digital certificates, not digital currency. “We do not participate in banking, ICOs, etc.,” says Lindholm. Plus, Long and others who’ve helped draft Wyoming’s blockchain bills insist the state’s regulatory standards are high. They have to be, if Wyoming doesn’t want to tarnish its reputation as the blockchain state.
Scammers have already attempted to sneak in, like one ICO-issuer whom Long reported to the SEC last year. Others have falsely claimed they’re “regulated by Wyoming” on their websites, Land says.
Two days later, Long officially announces her resignation from the Wyoming Blockchain Task Force in a post on her website (it’s a symbolic resignation, as the task force already dissolved). Dotted with the exclamation marks you can hear when she speaks, Long’s post shows gratitude for her time and colleagues. She’s going to “consider starting a proper job,” she says.
Land says he knows what that job is – a high profile position at a blockchain company in Wyoming, I’m led to believe – but he won’t say, and Long tells me she’s “not going to make quick decisions.” After two years of working on an entirely volunteer basis with the Blockchain Task Force, she may be able to finally reap the benefits of the laws she helped pass and the connections she forged between big blockchain industry players and her sparsely populated home state. Always on brand, Long ends her resignation post with a note that reminds us she did it all for Wyoming.
“I’m going offline for a while to make some decisions and will let you know when I come back up for air,” Long’s post ends. “It was a tremendous honor to serve my beloved home state on the Task Force. Thanks for your support everyone, and #CowboyOn!”