CHEYENNE – Look for more decentralized organizations, which use digital tokens to track membership and more, to come to Wyoming. This is thanks to the legislature passing and the governor signing an update to what is characterized as a one-of-a-kind state law.
Cryptocurrency executives and experts told the Wyoming Tribune Eagle that the state is likely to add more such groups. These entities are sometimes referred to as Decentralized Autonomous Organizations, or DAOs for short.
Although it may not be widely known in the state and among the residents of its capital city, Wyoming is considered nationally to be a pioneer when it comes to virtual currency. Stakeholders agreed last week that new updates to Wyoming’s DAO law will further boost cryptocurrency locals’ interest in doing business here.
Due to a potential gap between public understanding of this sector in our state and the increase in such activity, the WTE plans to increase its media coverage of local digital asset issues. This article is a sort of installment for you, the reader, in our early efforts to cover this emerging technology.
Even tech experts who don’t specialize in cryptocurrency specifically say they don’t have a full understanding of cryptocurrency and its many flavors. But it’s clear that Wyoming has added dozens of state-incorporated DAOs since the legislature passed legislation about a year ago specifically targeting those organizations.
One organization, which became the first to take advantage of last year’s DAO Limited Liability Companies Act last July, said the legal structure was crucial to its formation.
Upon registration with the Wyoming Secretary of State’s office, which happened almost immediately because the company was ready to operate, DAO status gave American CryptoFed the structure it needed to seek federal recognition. of its virtual currency. Although federal regulators have yet to grant approval, at least Wyoming has made it easier for them to fit in here and then seek US approval, said company executives, including CEO Scott Moeller.
“When Wyoming allowed us to do the DAO,” COO Xiaomeng Zhou said, “this is the first time it can happen to mankind, that’s how great the Wyoming DAO is. important.” Speaking on the video conferencing app Zoom on Saturday, he was referring to the organization’s goal of having a stable currency that is unaffected by inflation and trades without human intervention or control. an individual or a government.
“Wyoming is now recognized as one of the top blockchain destinations in the world,” Moeller said of the distributed network that allows DAOs and other cryptocurrency entities to track transactions and more. things. “I strongly believe that Wyoming will derive outsized benefit (from) these laws. They do things to support freedom, not constrain it.”
Cryptocurrency proponents said they’re optimistic Wyoming will continue to add digital assets, DAOs, and related businesses and activities, largely because lawmakers here passed relevant laws quickly. And at the federal level, one of the state’s two U.S. senators, Republican Cynthia Lummis, has been a particularly vocal proponent of virtual currency development. (His office has not commented on this article.)
Some of the law firm Croke Fairchild Morgan & Beres are “watching this very closely,” partner Michael Frisch said of the Wyoming DAO’s activities, including the new law, Senate File 68. We have a lot of clients looking to decentralize their own operations,” said the attorney, who specializes in digital currency and related issues.
The original DAO law that passed the Legislature in a previous session and the new updates to it are overall “good for Wyoming,” Frisch said Friday. “There are thousands of DAOs (worldwide). People are looking for a suitable jurisdiction in which to form an entity.” He said that the state having a “wrapper” for these organizations to form a “legal entity” through an LLC is “a really significant legal development.”
The Legislature has its own panel dedicated to these issues, the Select Committee on Blockchain, Fintech and Digital Innovation Technology. State House of Representatives and Senate lawmakers are members, and they heard testimony on the DAO’s proposed update in January.
Following the hearing, stakeholders and a fellow legislator recently recalled that Sen. Chris Rothfuss, D-Laramie, and Rep. Jared Olsen, R-Cheyenne, then helped deliver the status update to the CAD. Referred to as SF 68, it was titled “Decentralized Autonomous Organizations-Amendments”. Asked on the last day of the 2022 legislative session on Friday as lawmakers focused on other last-minute matters, neither Rothfuss nor Olsen commented on the SF 68.
SF 68 essentially updates the state’s existing DAO statute so that the law better reflects how people join, leave and vote in these organizations, according to stakeholders and the text. These entities use blockchain as an organizing principle, a means of tracking digital tokens or other virtual currencies that serve to show who has a membership interest.
A blockchain is essentially a list of transactions that is maintained on a widely distributed network, not controlled by any particular company, association, or country. Virtual currency is also based on a blockchain ledger.
One of the instruments that the DAOs use in their self-governance are the so-called smart contracts, which the new law also mentions. These pacts can evolve over time, without requiring legal action to codify the changes, the experts noted.
“All smart contracts used by a decentralized autonomous organization must be capable of being updated, modified, or otherwise upgraded,” said an addition to the law that SF 68 helped enshrine. The law states that the blockchain can be a means for the DAO to publish information for all members to see, and when the group does so, it has “no (other) obligation to provide information to members or dissociated members regarding the activities of the organization, the financial situation or other circumstances.”
On Wednesday, Governor Mark Gordon signed the bill into law, according to his spokesperson. Another bill on this new technology was also advanced during the last legislative session, Senate File 106, called the Wyoming Stable Token Act. There was no word Saturday on what might happen with this proposal. (Future WTE media coverage will cover this legislation.)
Even before the DAO governance revisions that Gordon signed into law last week, Wyoming had seen an influx of such entities.
In January, as the bicameral Blockchain Panel of the Legislative Assembly considered the matter, a state official discussed the extent of distributed organizations based here.
Karen Wheeler, Assistant Secretary of State for Wyoming, noted that the DAO LLC registration law went into effect July 1. According to the panel’s summary of her remarks, she said there were 130 active DAOs in the state as of December 31. They had brought in $12,800 in revenue (presumably for the state itself). Updated figures were not immediately available.
Representative Andrew Ocean, R-Laramie, is among lawmakers hoping to see more virtual currency operations in Wyoming. “I am very supportive of our state’s blockchain industry, and I support any bill that can help,” he wrote in an email to WTE.
Wyoming is “one of the few places that officially recognizes it, at least in the United States,” said attorney and cryptography expert Dane Lund, who testified about DAOs during the committee hearing. blockchain in January. It is “a place that is a catalyst for innovation in corporate governance and this is a welcome signal for people trying to do things that have never been done before, in a responsible way”. Lund, who lives in Chicago, hopes Illinois will follow Wyoming’s lead; he’s a major contributor to Alliance, which helps tech start-ups get off the ground and is on its way to becoming a DAO itself.
Ultimately, some hope that the increase in the number of DAO LLCs registered in this state will help boost tech employment locally.
This form of organization can make it easier for startups to raise small amounts of money from a range of investors, according to CEO Jae Yang of Tacen, a Cheyenne-based blockchain consultancy. Once these companies start operations, using the distributed governance model of the blockchain and operating as a DAO LLC can facilitate transparency and efficiency.
Tacen moved from the San Francisco Bay Area to Cheyenne last year, lured here due to “regulatory certainty,” Yang said via Zoom on Saturday. “Wyoming came out on top, by far,” of the other states it was considering passing, “were not quite up to scratch in terms of the government’s understanding of blockchain and its willingness to experiment”.
Tacen now employs about 10 people here, more than half of whom were hired after moving, Yang estimated. It has about two dozen additional employees in several countries, including elsewhere in the United States. Yang hopes other digital asset companies registered in that state will also add local staff, and thinks that might happen over time.
“It’s just getting started,” the executive said of the DAO trend, which his company hasn’t yet embarked on but might consider. “Give it a few more months, and you’ll start to see a lot more of it.”