WYOMING BLOCKCHAIN TASK FORCE

May 23, 2019

The Honorable Senator Mike Enzi Senate VIA EMAIL to [email protected]; [email protected] The Honorable Senator VIA EMAIL to [email protected] The Honorable Representative United States House of Representatives VIA EMAIL to [email protected]

Senator Enzi, Senator Barraso, and Representative Cheney:

As you may be aware, the Legislature created the Wyoming Blockchain Task Force in 2018 to pursue unique and forward-thinking digital asset regulation in Wyoming. Through the work of the Task Force, and with broad support from the Legislature during the 2018 and 2019 legislative sessions, Wyoming passed effective and progressive laws which have propelled it into the national spotlight and onto the frontier of financial technology regulation. Among other successes, Wyoming's laws are widely recognized as providing a well thought-out and workable approach to determine the legal nature of specific digital assets, including digital tokens.

Recently, H.R. 2144 was introduced in Congress. H.R. 2144 is known as the Token Taxonomy Act of 2019 and is a revised version of a bill initially proposed last December by Representatives Warren Davidson and Darren Soto. While the original Act sought to achieve several laudable goals, including lessening confusion by clearly excluding certain digital assets, called "digital tokens," from regulation as securities, the new Act adds a proposal to preempt state laws regarding digital assets. Although the proposed preemption may be targeted at heavy-handed regulatory schemes adopted in a small number of states, the Act throws out the good with the bad and significantly defeats parts of Wyoming's new, widely praised regulatory structure. In the absence of state laws like Wyoming's law, the Token Taxonomy Act's definitions and regulations could serve as the public's only guidance on the classification and treatment of a number of digital assets. As currently written, the Act is not adequate for that purpose.

BLOCKCHAIN TASK FORCE • 200 W. 24TH STREET • CHEYENNE, WYOMING 82002 TELEPHONE (307)777-7881 • FAX (307)777-5466 • WEB SITE www.wyoleg.gov

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The Token Taxonomy Act of 2019 defines "digital tokens" in an overly-broad, one-size-fits-all approach that is vague and that does not constitute clear regulatory guidance. Further, the Act's preemption of state law ignores the fact that states can serve as incubators for regulatory innovation. Preemption restricts the financial technology industry's access to state regulators who can move more quickly than can Congress and who can best accommodate rapid advancements in the creation, issuance, holding, and transfer of digital assets.

The Token Taxonomy Act also threatens states' rights. The federal government has long preempted the field of securities regulation. However, the proposed Act, itself, recognizes that digital tokens are not securities. As a result, they are property subject to the traditional and well- recognized jurisdiction of state law. The Act's efforts to expand federal preemption over assets that do not constitute securities is a clear infringement on powers which are, and should be, reserved to the states.

Please allow this letter to serve as a formal request that you support Wyoming's leadership in digital asset governance and reach out to the Task Force as federal efforts to regulate digital assets arise. With regard to the Token Taxonomy Act, the Wyoming Blockchain Task Force requests that each of you take an active and leading role as the Act works its way through Congress. While there remain valid and appropriate legislative changes in the Act (e.g., changes related to taxation, clarifying application of the Commodity Exchange Act and Federal Trade Commission Act, and the preservation of states' ability to prosecute fraud), the Task Force asks you to assure that any congressional action reflects the interests of Wyoming and does not defeat regulatory progress made in Wyoming. Any legislation passed by Congress needs to provide specific and useful guidance. We ask for your opposition to the Token Taxonomy Act to the extent it preempts state regulation of digital assets and infringes upon Wyoming's legitimate and long-standing rights.

We would be happy to discuss the details of Wyoming's new digital asset laws with you and your staff and are happy to help in whatever way we can.

Yours sincerely,

Senator Representative Tyler Lindholm Cochairman, Wyoming Blockchain Task Force Cochairman, Wyoming Blockchain Task Force

BLOCKCHAIN TASK FORCE • 200 W. 24TH STREET • CHEYENNE, WYOMING 82002 TELEPHONE (307)777-7881 • FAX (307)777-5466 • WEB SITE www.wyoleg.gov