Adam Tracy Discusses Wyoming Special Purpose Depository Institutions
TRANSCRIBED FROM: https://www.adamtracy.io/video/wyoming-cryptocurrency-bank/
So, crypto banking is always a hot topic because nobody can find them, right? It’s just a matter of preference for mainstream banks not to take anybody related to blockchain or crypto. And that’s mainly driven by AML KYC concerns, which, you know, are largely unfounded, but that’s just where we are. Right? So you have two banks that sort of promote themselves as being crypto friendly. You have Silver Gate in California and you’ve got Signature in New York, and Silver Gate is, uh, hyper selective in terms of what entities it takes on as clients, and Signature is also selective, but perhaps not as selective as Silver Gate, which I think at the present time isn’t taking new clients, but has very high minimum balances that, um, most startups aren’t going to meet. So it really kind of leaves the rank in file startup or rank in file crypto blockchain operation out of, out of sync with, um, the banking, regular banking channels, right?
But Wyoming has done kind of an interesting thing and in the past they’ve, they’ve had about 17 different blockchain related laws go through their legislature, and they’ve really made efforts to go from what was really a very difficult jurisdiction to get even a money transmitter license to be w- pr- undoubtedly the most friendly pro-blockchain state that there is, and amongst that l- legislation was, uh, back to spring was HP 74, which created a crypto bank, right? And it’s relevant now because the law and applications open up August or… rather October, first, here in a couples weeks, and, uh, the banking’s interesting. Right? So the, the special purpose depository institution, which is what the law c- calls it, is designed to be blockchain crypto friendly.
Um, the problem with that is that it’s not going to be FDIC insure because the FDIC is traditionally eschewed any attempts in any connection with blockchain or crypto as have their member institutions. Right? And that’s for the exact same reasons. And the FDIC is just basically guarantor bank for other banks. So as a result, the special depositor- Wyoming Special Depository Institutions are going to have to carry o- one hundred person of their liabilities in reserve. So what does that mean? Well, your deposit at a bank, whether it’s two dollars or a million dollars, is a liability on the bank’s books, right? And now, this bank under the Wyoming [inaudible 00:03:38] won’t be able to extend loans, which a traditional bank would, and therefore, a regular bank only carries approximately 10% of its deposits at any given time. These banks will have to carry 100% or more of their deposits as effective collateral, because they won’t be FDIC insured.
So, a 10 million dollar bank will have to have 20 million dollars in assets. A 100 million dollar bank will have to have 200 million dollars in asset. So for every dollar that they take on deposit, they’ll have to have another dollar to meet their depository requirements, so it makes it a bit untenable, and it’s interesting how that will kind of pan out, what my thinking is it will pan out in the view of very high fees, right? Because the bank will have to be Uber profitable to be able to keep up with that depository requirement. Um, but it’s, it’s interesting. The other limitation, obviously, is the fact that it is in Wyoming, right? And typically state chartered banks are limited to that state in which they’re chartered. But, you know, as has been my experience, has been my recommendation here in other places, is that for blockchain related companies, Wyoming is the place to incorporate, so Wyoming corporations, right? Even though the individuals controlling them may be in California or Illinois or in New York, will have the ability to bank in a commercial bases with that bank.
So, there’s more reason, you know, provided these banks come online and are, are untenable and real alternative to, uh, start your blockchain, incorporate your blockchain business in, in Wyoming, with the Wyoming LLC, which we’ve talked about here. It’s super easy, super cost effective. Best laws you can find. So, you know, and raises, it raises a lot of questions, but it’s a great step forward, right? It’s, it’s a great step forward for banking because conceivably within a few months of October 1st, you’ll see some of these crypto banks come online, and it’s just a matter of whether they can stay in business with the heavy depository requirements that they’re going to have, but my guess would be that they’re not going to be lacking for clients. It’s just whether or not those clients are profitable enough to, to make, uh, make a go of it. So if you’re looking to start a c- a Wyoming crypto bank, be sure to hit me up. I’ve got some more information on how that’s going to go down, come October 1st. And if you’re obviously a company looking for banking, I’m happy to always help make introductions to banks here or elsewhere. Just, uh, shoot me an email. Adam@adamtracy T-R-A-C-Y dot I-O. Happy to help, and I’ll talk to you later.
A former professional rugby player, Adam S. Tracy brings over twenty years’ experience as an attorney, consultant and dealmaker with a particular focus on cryptocurrency, digital products, payments and immersive corporate structures. As an accomplished executive and advisor to high risk merchants and stakeholders, Adam has proven himself as a results oriented, decisive leader with proven success advising early market entrants, technology adapters, as well as established participants across a wide range of verticals. Adam Tracy’s attack-first personality allows him to excel in dynamic, demanding environments including complex corporate negotiations, distressed environments and regulatory investigations.
In addition, Adam S. Tracy also has a successful track record co-founding high risk industry ventures, building & leading cross-functional teams, and spearheading diverse corporate transactions. A serial entrepreneur, Adam has successfully started and created exits across a wide swath of markets, including various mobile SaaS ventures, nutraceuticals, peer-to-peer payment systems, and several telemarketing-based ventures. Moreover, as a recognized expert in the payments field, Adam Tracy has been a blockchain and digital currency evangelist and influencer since the early days of Bitcoin.
Utilizing his proprietary “Pre-Event Driven™” strategy for decision making, Adam S. Tracy further leverages his over twenty years’ experience to create cost-effective, value-add solutions for each client. A data-driven acolyte, Adam continually refines his strategies based on field studies and data collection. Moreover, Adam Tracy further augments his range of solutions by actively networking with regulators, liquidity providers, legal and compliance experts, deal-flow brokers, investors and management of leading high risk industry ventures.
Adam S. Tracy earned his Bachelor of Science in Computer Applications and Bachelor of Science in Finance from the University of Notre Dame. He subsequently earned his Masters in Business Administration from the DePaul Kellstadt Graduate School of Business, while concurrently earning his Juris Doctorate from the DePaul College of Law. Adam lives outside Chicago with his with his wife, four dogs, and two cats.
On the Web: https://www.adamtracy.io
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