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Is Wyoming setting the example for Bitcoin regulation?

Caitlin Long, Avanti Financial Group Founder and CEO, joins Yahoo Finance’s Zack Guzman at the Bitcoin 2021 Conference to discuss regulation on cryptocurrency.

Video Transcript

BRIAN CHEUNG: A massive conference going on down in Miami, Florida, where some of the biggest names in crypto are gathering. So let's check in with Yahoo Finance's Zack Guzman. He's been down there covering all the happenings at the Bitcoin Conference, and he's joining us now with a special guest. Zack.

ZACK GUZMAN: Yeah, Brian, appreciate that. We just keep our live coverage here on here with Caitlin Long, the CEO of Avanti Bank. Thank you for stopping by. I'm very excited to chat because, finally, we're going to be digging into a very maybe not talked about as much, regulation piece of all of this-- but it's pretty important.


You guys there in Wyoming have made a lot of strides when it comes to regulation and doing it right as a bank. People might say banks are bad when it comes to Bitcoin, but not the case.

CAITLIN LONG: Not all banks.

ZACK GUZMAN: Talk to me about what you've been working on and why people might think regulation isn't necessarily a bad thing.

CAITLIN LONG: Well, any time the US dollar is involved, you're touching the banking system, and you're touching, therefore, regulation. And ultimately, there do have to be on-off ramps between Bitcoin and the crypto ecosystems back on and off to the US dollar. And therefore, you're touching the Federal Reserve, ultimately. Whether directly or indirectly, the Federal Reserve has a say in this.

They have, up until recently, not said much, but you're now starting to see a lot being said, including recently by Chairman Jay Powell himself talking about this industry. And it's all part of what is essentially a drip, drip, drip of almost every day something coming out of Washington, DC that's indicating there's regulation coming to this industry, but also doing it in such a way to give us optimism that it's not going to be too onerous. It's something that if you pay your taxes and you comply with the law, you're going to still be able to operate in this system.

ZACK GUZMAN: Yeah, it's not a reason to panic. And you guys have proven that out too-- I mean, for years, you worked with Senator Lummis in Wyoming to kind of push for a framework that the nation can adopt. Talk to me about what you were able to do there, as you guys now have a charter, and kind of proving out what it would look like on a national level.

CAITLIN LONG: Well, sure. Avanti is a Wyoming charter bank but able to do business all around the world. So even though a state took the lead here, it doesn't mean that it's only for customers in the state. It could be customers almost literally anywhere in the world where a US bank is recognized.

But what Wyoming did was understood that regulation was coming, and also in some degree was needed. No one really knows what Bitcoin is legally. Is it property? Is it a stock? Is it a commodity? Is it money? And so Wyoming was the first state in the United States to step forward and give it some definition.

What that does is give the businesses in the industry clarity to operate, because you know you can get clear legal title to the asset. And judges have a road map to adjudicate disputes. This is not rocket science. But actually, only one state in the United States has done this yet, and it's Wyoming. And that's why a lot of businesses are domiciling there.

ZACK GUZMAN: Yeah. And you levered all your learnings from a career on Wall Street to kind of carry this over into the Bitcoin space. But when it comes to the other big aspect that we also don't talk about much, which I was excited to talk to you, is stablecoins and the important piece of the equation that's there.

And Tether is one of those. And it's probably a good thing, maybe, to see the Fed talking about stablecoins and introducing their own. But what do you make of that, given that it seems like potentially a risk there in bridging the crypto world with the traditional finance world, because you kind of have to trust the tether is $1, basically.

CAITLIN LONG: Well, it's so interesting because I think that tether technology-- there's an old line that former Fed Chairman Paul Volcker used to say during the financial crisis, that there hadn't been any real innovation since the ATM was created. He said that back in 2009. And I think if he were looking at the world today, he would say, there have been two real innovations in the last four decades, and it's been stablecoins and the ATM.

Stablecoins are a really powerful payment technology. The interesting challenge, though, is that, as we just talked about, they touch the US dollar. Therefore, they touch the US banking system. Therefore, the Federal Reserve has something to say about that. And we have started to see, like we talked about, Chairman Powell and Fed Governor Lael Brainard also specifically speaking about stablecoins, which for those who are Fed watchers, definitely gives everybody a little bit of pause to say, OK, something's coming.

They're definitely sending, in Fed speak, a warning. But also, I think, ultimately, getting some clarity around this is very good. One of the big stablecoins, USDC, has a big warning in its terms and conditions that says that the legal status of this is not clear. And it's not, therefore, clear-- paraphrasing here-- that transacting in this would be legally enforceable anywhere in the world.


CAITLIN LONG: And so when you're touching things like US dollar instruments, again, those very basic bricks and mortar, picks and shovels type infrastructure issues matter a lot. And so ultimately, I think we will get some clarity here, just putting the puzzle pieces together from some of the things the Federal Reserve has said over the years-- they want it inside the banking system.

Up until Wyoming created a special purpose charter, it wasn't possible to bring these things inside the banking system. And now we do have the Wyoming special purpose banks applying to the Fed to bring them inside the banking system.

ZACK GUZMAN: And really, it's probably a good thing for the end retail consumer here too, because there are still questions around some of these institutions who are lending in crypto, because they don't necessarily have to go through the same watchdog banks. And obviously, if you're saying a cryptocurrency is a stablecoin, and it means it's $1, and it's not necessarily regulated, that would present a rather big risk, I would assume, to the entire sector.

CAITLIN LONG: Yes, that's right. And part of me, because I'm such a big bull on this technology, I look at some of the practices from some of the intermediaries that have sprung up around this technology, most of whom are unregulated for exactly the reasons that you allude-- partly is that there haven't been clear pathways to getting them regulated. That is the responsibility of the policymakers. They haven't opened up those pathways.

So it's kind of like the internet in the early-'90s. Everybody just did it and assumed that they would have to ask for permission later maybe. But here, I think it's different with digital assets, because you're dealing with money. And you're dealing with consumer protection issues.

And as a result, the regulators are definitely going to require folks to ask for permission instead of forgiveness, so to speak. And that is coming. And again, just reading the tea leaves from the comments that have been pretty clear coming out of the Federal Reserve, get regulated, do this inside the guardrails that have been created.

And a lot of it is very much related to consumer protection. I've been outspoken criticizing some of the intermediaries in our sector that have not taken consumer protection seriously.

ZACK GUZMAN: Yeah, and they're probably the ones that are going to get hit the hardest when some of these regulatory frameworks are imposed. But it's been fascinating to watch, and it's been very helpful to listen to you. And your tweets also have been very good on the matter too. But I appreciate you coming on here to chat with us, the CEO of Avanti.

CAITLIN LONG: Thank you.

ZACK GUZMAN: Thanks again.