Wyoming Stablecoin: Yield Freedom

Wyoming is on the verge of becoming the first US state to launch its own stablecoin. This move potentially sets the stage for a confrontation with federal authorities concerning how the state-backed, dollar-pegged digital asset will adhere to recent legislative mandates, specifically those stemming from the GENIUS Act.

Sources intimately involved with the development of the Wyoming Stable Token (WYST) have indicated that Wyoming, known for its independent spirit, may resist federal attempts to seize or freeze funds held within the system. These individuals spoke to Decrypt on the condition of anonymity.

While the GENIUS Act requires stablecoin issuers to implement “procedures to block, freeze, and reject specific or impermissible transactions,” proponents of WYST argue that these rules might not fully apply to a state-issued token, potentially including the restrictions on offering yield.

“We are confident in our ability to offer interest or rewards on our stable token,” stated Wyoming Democratic State Senator Chris Rothfuss, who leads the state’s Select Committee on Blockchain, Financial Technology, and Digital Innovation Technology, in an interview with Decrypt. “While we haven’t finalized a decision, there is significant support for the idea.”

Rothfuss clarified that while WYST won’t offer yield at its initial launch later this year, the functionality is being built in, and lawmakers are actively resolving logistical challenges. The primary objective of the project is to allocate revenue generated to support Wyoming’s educational system.

Rothfuss also mentioned that Wyoming legislators are considering different elements of the GENIUS Act, a wide-ranging regulatory framework for stablecoins, poised to unlock greater participation and competition in the $280 billion stablecoin market, currently dominated by Circle and Tether.

Despite being viewed by some as an endorsement of the crypto industry’s legitimacy, some lawmakers, including Rep. Marjorie Taylor Greene (R-GA), worry the legislation might undermine Americans’ financial independence.

“This bill regulates stablecoins and paves the way for a Centralized Bank Digital Currency,” she stated on X last week. “This will open the door to move you to a cashless society and into digital currency that can be weaponized against you by an authoritarian government.”

CBDCs are centralized, digital forms of government-issued currency. While they share similarities with stablecoins, they are issued by central banks rather than private companies on public networks, sparking concerns among lawmakers like House Majority Whip Tom Emmer (R-MN).

In March, Emmer told Decrypt that the Wyoming Stable Token essentially constitutes a state-backed CBDC. Anthony Apollo, the executive director of Wyoming’s Stable Token Commission, countered that WYST is fundamentally different, highlighting that WYST is backed by US Treasuries, whereas a government could simply create a CBDC without underlying assets.

In a recent interview with Decrypt, Apollo explained that the Commission shares “the same concerns that any issuer will have about the potential for illicit activity” and is working to integrate blockchain analytics firm Chainalysis and open-source intelligence firm Inca Digital for monitoring purposes.

Still, Wyoming’s Select Committee on Blockchain emphasized in a recent letter that the Commission must “resist pressure to act as a political or financial gatekeeper,” especially given the “heightened standards” imposed by both the United States and Wyoming Constitutions.

Apollo stressed that the Commission’s commitment to upholding constitutional protections is a key differentiator for WYST compared to other stablecoins.

“We have a significant distinction from existing stablecoin providers, who can alter their policies at will and freeze assets based on internal rules. We must have freeze and seize capabilities to comply with the law, but these powers can only be invoked with a valid court order,” he said.

Rothfuss echoed this sentiment, noting that Wyoming lawmakers have long viewed the state’s ability to navigate federal requests with nuance as a strength.

“We are not subject to the same federal compliance obligations as a corporation would be,” he said. “We have sovereignty. So, when the government opposes, they can’t simply issue a cease and desist letter and start arresting individuals.”

After criticizing the idea of a digital dollar during his campaign, former U.S. President Donald Trump signed an executive order prohibiting federal agencies from working on CBDCs earlier this year, despite repeated assurances from Federal Reserve Chair Jerome Powell that the U.S. central bank had no interest in issuing one for everyday transactions.

Presidential hopefuls, Florida Governor Ron DeSantis, and U.S. Secretary of Health and Human Services Robert F. Kennedy Jr. also cautioned against the dangers of CBDCs. DeSantis specifically cited concerns about government control over consumer goods.

Wyoming has a historically complex relationship with Washington, DC, stemming from the federal government’s ownership of approximately 48% of the state’s landmass. This has led to disputes over resources and a perception of federal overreach.

WYST is currently in a pilot program and is expected to launch on at least one blockchain network in August at the Wyoming Blockchain Symposium. Potential networks include Ethereum, Solana, and Avalanche, among others.

Wyoming is testing WYST’s capabilities in real-time payments to government contractors using an Avalanche-based protocol developed by Hashfire. John Belitsky, CEO of Hasfire and an advisor to the Commission, believes that other states may join Wyoming, but Wyoming’s fundamental ethos remains unique. He said to Decrypt that its philosophy is not easily replicated.

“Wyoming is a state that values its constitution and avoids unnecessary regulations,” he said. “Other states can launch their own tokens, but will they cooperate with overreaching federal agencies?”