The United States is in a unique position regarding bitcoin regulation. The country is not only the third largest by population in the world, but because of its lack of consistent and defined federal regulations, states are generally free to take their own stance on the matter. And crypto-enthusiasts are heading to the Wild West for the best deals.
On the national level, the United States has taken a relatively cautious approach to regulation. With the SEC ruling that cryptocurrencies are not, in fact, currencies, but taxable commodities similar to stocks. While it does provide BTC and other cryptos with the protection from manipulation that other commodities benefit from, it is not unreasonable to suggest that the country is pushing a “blockchain, not bitcoin” agenda that is more supportive of the banking industry than the idea of a global, decentralized digital currency. Despite this position, bitcoin paid for services or wages is still taxable.
While a broad federal stance has yet to be set in stone, some states have taken a strict approach on the matter.
Connecticut, a state once notorious for skirting taxes and hiding money through thousands of empty offices acting as “home bases” for businesses looking to fly under Uncle Sam’s radar, has taken a notably tight stance on cryptocurrencies. In June 2017, Connecticut passed a law requiring anyone selling or storing bitcoin to have a license, in addition to a surety bond in an amount determined by a state regulator on a case-to-case basis based on the projected profitability of the individual’s project. This law doesn’t necessarily target individual holders or investors, but money transmitter services. The term is broad, but it essentially targets businesses which accept payment in cryptocurrencies and then transfer it to another party. This law is in stark contrast to traditional money transmitters, or money transmitters not involved in the crypto-space, who enjoy much more relaxed regulations.
Indeed, businesses are on the top of priority list for regulators across the country. Georgia, New York, and Hawaii have also rolled out similar regulations. Even California, tech center of the country, is looking to follow suit.
But this stance isn’t shared by everyone.
Surprisingly, or not surprisingly, cowboy country is proving to live up to its Wild West history, with Texas and Montana offering some of the most relaxed positions on cryptocurrency in all of the United States. Texas, in particular, has taken an early approach compared to many others in stomping out schemey projects that could potentially damage the progress of cryptocurrency adoption.
In early January, the Texas Securities Board issued a cease and desist order against the controversial British-based Bitconnect investment scheme just before the company’s shutdown at the beginning of the year, alleging that “"BitConnect is engaging in fraud in connection with the offer for sale of securities."
Texas also targeted the cryptocurrency bank, AriseBank, which was also labeled as a scam by many crypto-enthusiasts after providing false information to potential investors in its ICO. Arise was ordered to leave the state.
Another state taking a surprising stance on the industry is Wyoming.
Launched in November 2017, the Wyoming Blockchain Coalition looks to raise awareness and create supportive regulation within the state. “The mission of the Wyoming Blockchain Coalition is to educate Wyoming citizens about the power of blockchain technology to cut costs, streamline administrative processes and spur entirely new businesses in Wyoming,” the coalition’s website reads.
On Friday, the state will vote on a package of blockchain bills. If passed, the state will be able to host blockchain related LLCs which will enjoy zero income tax and zero franchise tax, in addition to a new layer of privacy standards for LLCs formed in Wyoming. Additionally, the aptly named “bitcoin bill,” aims to exempt tokens and cryptocurrencies from Wyoming’s money transmitter laws. The state is even looking to be the first to offer businesses the opportunity to register their LLC on a blockchain.
The icing on the cake for businesses thinking about relocating to the Cowboy State, however, is its cheap power. Ranked one of the cheapest places in the country to mine bitcoin, a perfect storm may be brewing.
Wyoming isn’t without competition however. The not so sunshiny state of Washington also enjoys cheap power and the small town of Wenatchee has become an unlikely hub for miners in the U.S.
Home to 12 of the largest miners in the country, the conveniently located small town of Wenatchee, located in Port of Douglas county, offers incredibly cheap power thanks to its hydropower capacity. Costs are as low as $0.02-0.03 per kwh. And miners have begun to take notice.
Steve Wright, head of the local utilities company, noted: "We've come from just a few people out there who have been knocking on the door all of a sudden to people who are banging on the door pretty loudly."
The county is racing to keep up with demand, explained Port of Douglas manager of economic development Ron Cridlebaugh. Port of Douglas is currently in the process of adding another 100 megawatts capacity just for data centers. "It's going to take some time to catch up because growth has been so quick."
Land of Opportunity
It should come as no shock that the United States’ crypto-scene is as diverse as its landscape or the people that inhabit it. The federal government is taking a back seat as it does with many new approaches are tested by states, something not uncommon for the country.
As cryptocurrencies grow into their own, these are all positive signs for the space. The U.S. is able to float many different case studies before any major regulation is implemented, something that no other country is offering. While entrepreneurs may still head to NYC to do their trading, others are looking to the vast rural areas of the country for the real Wild West of the crypto-space.