On The Brink with Castle Island - Chris Rothfuss on Wyoming's Blockchain Strategy & the WY Stable Token (EP.432)

Episode Date: June 19, 2023

Wyoming state senator and Minority Floor Leader in the Wyoming Senate, Chris Rothfuss joins the show. We cover Wyoming's crypto efforts to date to create a stable and secure digital asset ecosystem. In this episode: Senator's Rothfuss' pre-politics career and how he came to grapple with the crypto space Why Wyoming has an opportunity in digital asset policy The origins of Wyoming's blockchain select committee How the NY Bitlicense inspired Wyoming's efforts Why crypto policy isn't politically polarized in Wyoming Wyoming's foundational move to recognize digital assets under the uniform commercial code The origin of the SPDI charter Is there a future for the SPDI given that the Fed is denying master accounts? How Wyoming's SPDI emerged as a consequence of Chokepoint 1.0 Is the Fed blocking state charters unconstitutional? Wyoming's Stable Token Act and the prospects for that product How the WY Stable Token could be a huge windfall for Wyoming – and where the revenues would be directed How Wyoming is thinking about the permissionless qualities of the stable token  Further reading:  More about Chris Rothfuss More on the Blockchain Select Committee The Wyoming Stable Token Act 

Hello and welcome back to On the Brink. I'm Nick Carter. Today we're sitting down with Wyoming State Senator Chris Rothfuss, who is the minority floor leader in the Wyoming Senate. He's also the co-chair of the Blockchain Select Committee and is one of the individuals most responsible for Wyoming's push into digital asset legislation. As a state, they've been at the absolute forefront of the industry. They've passed 30 distinct piece of legislation pertaining to blockchain and digital. assets. We dig into a few of those today as well as their general strategy, what motivates Chris and his colleagues, and how they contrast their regulatory approach with that of federal government, for instance. In particular, we talk about the Wyoming Stable Token Act, which is very close to materializing and becoming reality. We could well see the first stable coin issued by a state. So we dig into what that looks like. We also talk about the future of the speedy now that the Federal Reserve has made it clear that it would deny master accounts to state chartered crypto banks and what the path forward is there. It's incredibly refreshing to have a conversation with Chris, who is so technical and directly

engaged in the subject matter, deeply understands the industry, and has a desire to create policy that actually works for the crypto space, especially when we contrast that with what we're seeing at the federal level these days. I really enjoyed this episode and learned a lot. I think you will as well. Let's dive right into it. Today, I'm very excited to be sitting down with Senator Chris Rothfuss from Wyoming, who is the minority leader in the Wyoming Senate.

We've said so much about Wyoming on this podcast, but we've never had someone in the political chamber in Wyoming on the show. There's so much to talk about Senator Rothfuss. you so much for joining us today. Well, thanks so much for having me. Look forward to the discussion and I'm happy to kind of get the word out about what we've been doing in Wyoming with regard to blockchain and Web 3. So you also, you sit on the select committee, the blockchain select committee in Wyoming. Is that right? Or you chair the select committee? I am one of the co-chairs of the select committee and have been, we started as a task force about five years ago and then

formalized it to a select committee at co-chair it with Representative Cyrus Western. So you've had a really interesting career both in politics and before. So tell us a little bit about your prior career before making the leap into being a senator in Wyoming. Yeah, absolutely. My background is largely advanced technologies broadly. And I have a master's degree in chemical engineering and another master's in applied physics. And then a PhD in chemical engineering from the University of Washington, which was all nanoscale, electric, chemistry and fuel cell related science.

Then I spent three years at the U.S. Department of State in the Office of Space and Advanced Technologies working at large-end nanotechnology, foreign policy, but also space policy and other related advanced technology issues. And then we came back to Wyoming to raise our family here, basically. Wyoming is a great place to come from, a great place to go back to. So we had the opportunity to come back. And I've been at the University of Wyoming ever since working as a faculty, member faculty for the Honors College, but have stayed involved in advanced technologies over the past

decade plus, I guess nearly two decades now, and have really brought that expertise to the legislature and tried to up the game of Wyoming when it comes to advanced technology policy. And so it's been quite an adventure. I've been in the Wyoming legislature now for 13 years and for, I guess, 11 of those, the minority leader. And what was it that persuaded you to take the leap into politics full-time? Or I suppose it's not full-time. It feels like it. It's technically a citizen's legislature, which means it's supposed to be part-time,

but it never feels like part-time. It always feels like as much time as I possibly have available, which is all right. As far as the motivation, really, I do feel a strong need to kind of give back to the community and provide service. This is a great way to do that. give back to the state where I grew up. And it was an opportunity that my background, I had a lot of policy background, a lot of science background, and particularly I spent a lot of time in the energy sector as a chemical engineer. And Wyoming has traditionally been an energy state, largely a hydrocarbon

and minerals-driven economy. So one of the things I really wanted to focus on was looking forward for the state. We rely right now on coal, oil and gas for most of the income. and revenue that pays for our schools, paves the roads, does everything we need to get done. And I think everybody understands that the future there is certainly constrained. So we have to find solutions for the state to maintain its viability and for us to keep offering a high quality of life. So you've been incredibly active on the topic of blockchain and digital assets. What was it that first piqued your interest?

How did it even come on your radar in the first place? So I served as a, as I said, advanced technology consultant for many years and was working for a company out of the Pacific Northwest that was looking for innovative financial technologies. This was probably back in 2012, I want to say. And so my partner and I spent a lot of time looking at cryptocurrencies and other innovations at the time. and that was kind of the first foray into it was exploring the space back in 2012, understanding what Bitcoin had to offer, how it worked, and then kind of following the sector after that. And honestly, at the time, you know, being quite impressed with the system of technologies

that were put together to achieve this innovative product and solution. So I'm very happy to see that it's evolved over time. and that it's continued to grow and has really effectively begun to realize its mission and the reason that it was put forward in the first place. So yeah, it's continued over the years. And then in 2015 in the Wyoming legislature, we had a little task force on digital innovation and digital information privacy. And that privacy task force was structured.

to just kind of revamp Wyoming's privacy laws. They were rubbish at the time, and we thought we should try and get into the 21st century with those privacy laws. So we spent some time looking at various technologies, and one of the things that came on the radar during those discussions was the fact that a constituent in Wyoming was unable to purchase cryptocurrency

through Coinbase. I believe Coinbase was who they were trying to use, time because Coinbase would not operate in Wyoming. And this came on the radar of a good friend of online Tyler Lindholm, former Representative Lindelm, who was on that committee with me. And Tyler and I started looking into it and kind of began to understand that we had limitations on our interpretation of the Money Transmitter Act such that our division of banking believed that you simultaneously had to hold the value in fiat of the value in crypto. that you were going to transact to be compliant with the law, which was just a total failure to

understand how things worked. So we started looking around at what other states did. And what we came to quickly realize was that Wyoming was doing about as bad as you could when it came to cryptocurrency and digital asset law. But any state that was doing better was doing it by random law. There was no state in the country that actually had a regulatory structure, had a legal framework. If you were doing the right thing, it was by luck. If you were doing the wrong thing, it was by luck. And so we saw a lot of opportunity back in 2015 to bring Wyoming into a leadership position. And Representative Lindholm was a strong advocate and crypto holder at the time. So he thought it was a great space to get into. And so he and I spent a lot of time trying to develop

that ecosystem early on. Because I suppose the New York bill license was one of the first attempts to create kind of a specific crypto license at the state level, but that came later. It came just a little bit later, and we were just thrilled, right? When Bit License came out, we were thrilled because if New York was going to go exactly the wrong direction, it left an incredible opportunity for us to go the right direction and to really cultivate a financial technology sector and an innovation sector in the state of Wyoming. So, yeah, honestly, I think their misstep was a big part in our storyline. So we're going to dive into the specific things Wyoming has done with regards to digital assets and

blockchain here in a second. But generally speaking, what has been the sort of guiding star and the motivation to craft legislation that is more favorable to this industry? What is it that actually motivated you here? Well, our primary motivation really was that idea of being forward looking and recognizing recognizing that Wyoming needed to find some new industries and areas that we can innovate and lead in. We're a real leader in energy and have been for decades, but we have to pivot into a space that has a lot of potential for development and an opportunity for the future, not just looking backwards. So financial technology, financial innovation is a space where obviously there's a lot of growth potential, and specifically in digital assets and Web3 and crypto, there is an incredible.

incredible potential for growth. And we know that. We know that the community, the stakeholder community is clamoring for partners. And we heard that loud and clear early on. So we took on the philosophy of regulating to enable rather than regulating to restrict. In other words, building a regulatory structure that provided an incentive for entrepreneurship, innovation, and development of the digital asset space, where many other states and many other jurisdiction, just looked at it with fear and tried to hold it back. Now, at the same time, if you look at our legislation, it all has robust consumer protection. We have worked really, really hard to create as many bright lines as we can while still putting in place appropriate sureties and

programs and policies to make sure that our good actors are capable of operating to the freest degree they're capable of and bad actors would not benefit from our our structure our regulatory system and i think we've been very successful there honestly so at the federal level we see um unfortunately a fair amount of partisan divide on on the topic of digital assets certainly it seems to be the direction it's going what's it been like as a democrat in wyoming working with your colleagues cross the aisle on these issues. Well, on digital assets and crypto, it really doesn't necessarily break down well on party line. It breaks down more on the authoritarian versus libertarian line, as I see it. And Wyoming Democrats tend to be very libertarian in spirit, and Wyoming Republicans tend to be very

libertarian in spirit, most of them. So we didn't have any problem from a partisanship standpoint. And the reality is we were way ahead of national politics anyway, right? They hadn't even figured out how to draw party lines or who was going to be on which side when we started engaging in this space. And I honestly wish they'd do a better job of looking to us and realizing that it's not necessarily as scary or partisan as it appears. We know that Senator Lummis, for example, is working well with Senator Gillibrand. That's a great union, bipartisan union at the federal level to bring forward positive regulatory structure, positive legislation and appropriate way to govern at the federal level, the digital asset space, similar to what we've done at the state

level. So we know it can happen at the federal level, but I'm disappointed to see it taking on a little bit of a partisan light right now. At the end of the day, it really does come down to individual control or government control over finances and currency and, and, and And everything else we might be looking at in this space. And so it was easy for us to build a coalition in the Wyoming legislature. And honestly, one of the other positives was the fact that we had a strong coalition of legislators that were very experienced, very knowledgeable, and basically that hardworking group of legislators that you always want working on a topic. That isn't always the case.

That's one of the benefits of having a selection. committee or a task force is that you kind of pick you pick your champions a little bit and we've had good champions so on the i want to dive into all these specific pieces of legislation um i don't even know where to start there's so many i you're telling over 30 i don't know what our final our count is after the last session i should go back and count it but yeah over 30 pieces of past legislation that must be a record at the state level i would assume so yeah so you tell me you thought the most underrated one was actually the acknowledgement of digital assets under the uniform commercial code. It took place in 2019, if I'm correct?

That is correct. Yeah. So Senate File 125 was our first piece of legislation into this space, and it was very foundational and enabling. Any state that doesn't have a similar piece of legislation, you should not operate. Honestly, and I'll restate that. You should not operate a business in digital asset space unless they have something similar in place. And what this law does is it recognizes digital assets under the Uniform Commercial Code,

which is what states look to and what jurisdictions look to for their governance of property. So prior to us passing Senate File 125, and we were the first day to really get into this, nobody knew what a digital asset was if you were going to court. What type of property is it? How does a court treat it? What do you do with it? What would happen if you had some contested ownership considerations? There was no clarity.

And so everything was a mystery if you're going into a court. And nothing is less useful if you're trying to have an entrepreneurial startup opportunity than going into a court with question marks or going to an investor and saying, you know, we've got a great idea that we think is legal. Those are not the words you want to say. So setting up that foundation through recognition and mapping, that's how we did it. We basically mapped the existing uniform commercial code onto digital assets so that they were intangible property.

And through a series of mappings, we provided an opportunity for lean cleansing and provided other clarity that would allow then any entity that's operating in domiciled in Wyoming to go to court with certainty that if they own the keys to the digital asset, they own the digital asset. And again, there's still fraud. There's still all sorts of other things that come into play. But we established it such that if you had control, you had ownership. And that was actually contrary to how the Uniform Law Commission was drafting at the time. And so we intentionally flew in the face of what the Uniform Law Commission was trying to get done where they had an indirect control approach, more similar to securities. We took a look at that and basically

rejected it. They sent angry letters to us and to all of the legislature. And we ended up passing our approach because it was honestly a lot better thought through. And we worked with stakeholders that were an expert in the space and spent a lot of time on that legislation. And in the end, we passed it. And now it is the foundation of what the Uniform Law Commission has been building over the past few years. A lot of the same people that worked on our law and vetting. our law, worked with the Uniform Law Commission to restructure the Uniform Commercial Code, such that it more appropriately handles digital assets. And really, when you look to other states that are adopting an appropriate framework for digital asset property rights, it's all based

on Wyoming law and it's all consistent with Wyoming law. So this is something that's been taken up elsewhere as well following Wyoming's lead? Yes, absolutely. And other states, I think over the next couple of years, although there's some consternation about, and you'll hear about this in some nuanced discussions, which is largely fair uncertainty and doubt, that the Uniform Law Commission law that's being adopted by states is somehow an entree for CBDCs. That is largely rubbish, something we're following, but it certainly isn't the intent. the intent is to provide clarity of digital assets and has nothing to do with trying to promote or not promote a CBDC. It's just the idea of how do you treat a digital asset under property law. So I know a couple of governors got bent out of shape and vetoed some legislation on that, but nothing I've seen indicates that there's any scary underside to it.

Yeah, was that the case in Florida or am I misremembering? I believe Florida had that concern and one of the states near us as well. So they could go back and recraft a little bit. And in fact, we haven't adopted the Uniform Law Commission's version. We still have our own mapped on and are comfortable with it. I don't, we are investigating whether we should make any changes to provide uniformity. But right now, we don't have anything on the horizon to change our statutes. So I think what a lot of people know Wyoming for is, of course, the speedy charter,

which I've been tracking the whole time. And it's been such a journey, honestly. I mean, watching it get passed and then seeing the first few applications roll in with Avanti later custodia and crack in financial and now others. And then now that escalating into litigation, the Fed blocking master account. So it's been such a drama, honestly. but as someone that's a proponent of free banking, of course, that's not exactly what we're returning to. But I certainly support the state's right to charter their own financial institutions.

And of course, if you look at crypto, you look at the fragility in the banking model. I think it's certainly warranted to have these kind of full reserve banks existing. So just tell us a little bit about the origin of the speedy charter and how that's played out sense. Yeah, absolutely. So in 2018, we had put together our task force on blockchain and all things, digital asset. And basically just ask the question of the stakeholder community, what's holding you back? You know, what are the challenges that you're facing to develop your businesses and innovate? And one resonant concern that we heard over and over again was the idea that these companies, companies, they'd start up, they couldn't be banked, right? They'd go to their any bank, whether it was a national or local bank, and say, hey, we'd like to open an account so we can pay our payroll. And the bank would read their name. It would say crypto or blockchain or something along those lines. And they would just be told, I'm sorry, we can't bank you. And that

raised some eyebrows. And it raised eyebrows for us. So we're starting to investigate it. And it turned out that the FDIC had a policy at the time. And this is something that is now documented Operation Choke Point is what it's called. So anyone can look into that and find out all the dodging and sketchy things that were prioritized and done. But the impact was that if you were a digital asset or crypto company, the FDIC was restricting you from being banked from the federal level, even to state charter banks. So you couldn't open an account. You effectively couldn't be a successful business because you need to pay your payroll with it. You need to operate and interact with the banking system and that was being denied.

So we wanted to solve that problem. So, you know, one of the things that we did on the task force and still in the Slug Committee is kind of thought big. And we just asked the question, all right, well, what would it take to have a bank that didn't have to have FDIC insurance? And so we designed the special purpose depository institution, which is a 100% reserve bank, basically. So you're doing your business is not fractional lending.

Your business needs to be something else to make money off of this. where that's something else, for example, could be exchanging cryptocurrencies, releasing a stable coin. There's a lot of different possibilities, but basically you wouldn't be lending. You'd be holding in reserve whatever fiat comes in. And so we established a new type of bank charter that was a state chartered bank called the special purpose depository institution, the speedy bank, and spent a lot of time working on it and then spent a lot of time with our division of banking writing. writing thousands of pages of material for how to operate such a bank, maintain such a bank,

establish a charter, achieve a charter, because it was the first new type of charter that the country had seen in decades. And it was a Herculane effort, certainly one of our flagship products. There was a lot of enthusiasm and interest. The next year, as it was being built up, we refined it once stakeholders from around the country and around the world understood it. We ran another piece of legislation that clarified how they could custody digital assets and how that would interact with the bank charter. And we built an incredible creature. But one of the things that it's really important to emphasize is that early on, we understood the necessity of interacting with the Federal Reserve. And so we coordinated early legislative drafts.

This was clear back in 2018 and early 2019. We coordinated with the Kansas City Federal Reserve to make sure. that there weren't any gotchas, there weren't any major red flags. And in fact, in early drafts of the legislation, we even had language that basically said, if there's a problem,

here are funds and here is a path for the state to file a lawsuit to protect the Speedy Bank and to make sure that it has access to the Federal Reserve. In a back and forth with KC Fed, they asked that we take that out and said, no, there should be no showstoppers,

everything's going to be fine. So kind of a little handshake deal there. We said, fine. We'll take that out. We'll soften the language a little bit. We'll go forward. Everything's going to be fine. And, you know, as you know, and anybody that's followed the speedy banks is understanding.

It was anything but fine. And everything has been working great, except for the fact that the Federal Reserve is unwilling to grant master accounts. So that our state chartered banks, which are entitled to, access the Federal Reserve through the dual banking system. And a state chartered bank is entitled to operate in every state of the union through charters through their dual banking system. We are being denied access and custodias specifically is being denied access to the Federal Reserve. Thus, the lawsuit, we've been working on this for, I think we're up to around two years now in litigation. I mean, it's absolutely remarkable to hear the genesis of the Speedy was, you know,

objective being Wyoming in particular victimized by choke point 1.0. And then the idea was, well, it's created a full reserve structure that's not beholden to the FDIC. You know, fast forward to this year, one of the things that perked my ears up about what were some in the industry are calling choke point 2.0 was the denial of the custodia application. And then, of course, we saw these crypto-focused banks fragilized and then fail, I think in part due to, you know, federal regulator activity, I would say a portion of the responsibility there. Meanwhile, if custodia had been in operation, we wouldn't have, they wouldn't have been exposed to those kinds of risk because they were full reserve structure. Yep, absolutely. And that is, it's a

tremendous irony that all of the concerns that have made headlines over the past, what, year and a half of fragility, of currencies, stable coins that went insolvent, everything that's made the headline that's being used as fuel against the digital asset space would have been prohibited in Wyoming if our structures had been allowed to operate. They would have been fully scrutinized by our division of banking. There would have been no question, for example, with FTCS if that were a speedy bank. The degree of oversight and auditing that would have been in place to ensure that they were appropriately managing and handling their funds would never have allowed that to get out of

the gate. The banks would have been 100% reserve as speedy banks. So, yeah, we basically anticipated the potential concerns, put in place a regulatory framework that would protect against that risk so that consumers could be made whole. And then the Federal Reserve said, no, I'm sorry, you can't do that. We apparently like the high risk system. It's what we live by. And so we see them effectively collapsing marginal lending institutions

because they are doing exactly what the Federal Reserve wants them to do. And we know that's a high risk endeavor. It's another interesting feature about the Wyoming legal corpus is it contains the first mention of proof reserve I've ever seen at the state level in the U.S., which is now catching on. You know, of course, a proof of reserve being a type of attestation that a custodial institution would make to demonstrate to their depositors that they have the funds, of course. Now Texas has actually passed some legislation regarding proof of reserves. If that had been in place, as you say, we wouldn't have seen these disasters with the likes of FTCS and other exchanges.

And again, what it comes down to, which has been the way that we've been able to beneficially operate since we started this project, we've had incredible stakeholder partners, right? Because industry experts, the people in this space know what they need, know what they want. And good actors want a good regulatory structure and they want their customers to have confidence in. certainty in the industry. And the only way you can do that, good actors understand, is not by, you know, just giving a thumbs up to people and saying, no, trust us, it's there. If you have a regulating entity like our division of banking that provides scrutiny and says, yes, there's an attestation, proof of reserves in place that meets our standard of audit, then customers can be confident. That's what everybody wants and that's what we put in place as a response to industry.

Not, again, not trying to regulate to restrict because we want to stop industry, but really hand it, you know, shoulder to shoulder with industry coming up with these policies that would promote transparency and promote innovation in this sector and enable the sector. So really, it's disheartening when at the federal level, the regulatory structure is strictly put in place. or it seems to be strictly put in place at this point in time to punish, right, to deal out punishment when you can find somebody who's broken a rule here or there. In Wyoming, it's quite the contrary. Our division of banking spent so much time with our successful charters in the Speedy Bank space, just walking through and coming up with agreements and trying to get to the point where everybody was okay with everything, right?

I mean, the partnership approach to regulation as opposed to the, you know, penalty approach to it where we just need to get some penalties so that we can pay the bills or something. I'm not entirely sure what the motivation is. But you look at the mission of the SEC, you look at the mission of other institutions. And their mission is supposed to be about protecting consumers, helping, but also facilitating the development of these industrial sectors. They do not seem to be on mission at this point of time. Yeah, it's the dual mandate. Yep. So one particularly interesting thing I found in January when I started to get really vocal about the banking crackdown on the crypto space was, I believe it was January 27th or thereabouts.

The Federal Reserve issued this guidance, which was then entered into the Federal Register, saying, of course, in paraphrasing, something like even for non-federally regulated banking and. institutions, they should be beholden to the Fed's standards. I might be garbling that a little bit. But so to me, that looks like the Fed trying to grow the scope of their power over not just federally chartered banks, but also state chartered. Is that something that sort of you noticed as well? Yeah, absolutely. And again, therein lies the concern.

The dual banking system is supposed to recognize the sovereignty of states to operate and to participate in the federal banking system. The mission of the Federal Reserve is to facilitate that. I mean, it's a facilitating entity when it's doing things right. It's not supposed to control. It's supposed to facilitate. It has, again, taken on an interesting mission that is, I think, largely recognized by many people that they feel like they have a mission that is beyond scope.

But we are confronted with this idea that somehow the Federal Reserve controls the states. right that's what we're up against and the idea that that's the org chart right that's the hierarchy federal government federal reserve and then below the federal reserve are the states i don't think that was really how the constitution was structured i don't think that's how the org chart's supposed to be drawn and so we're a little disconcerted in wyoming that somehow we have to answer to the federal reserve uh we obviously recognize um u.s governmental primacy in many areas but But this is one where specifically states' rights were called out. And we're being held back by a quasi-governmental entity that's overstepping its bounds.

So status quo now, of course, custodious suing. I think it's the Fed or possibly the KC Fed. I'm not entirely sure. But what do you make of the future for the speedy, given everything that's happened? So the lawsuit's important. and I think the lawsuit in a finding of facts will hopefully prevail for custodia. It is a strong case. And I think when you look at precedent and when you look at the role of the Federal Reserve,

I hope that any federal judge is going to take a look at that. And we've got a good federal judge that's well respected that's currently holding court on that. know, I hope they'll come down on the side of custodia and we'll see that if that's not the case, then it's going to require litigation either by the state separately, which, again, the state of Wyoming made a motion to file and join with custodia, not on behalf of custodia, but in support of the state's interests specifically. So there might be more room for. litigation there. I believe the judge did not accept that because the judge saw the state's regulatory structure as not in question. And therefore, I believe the judge excluded the state

based on that reasoning. So one path would be potentially for the litigation, but the other path is then legislation at the federal level where this is certainly on Senator Lummis' rate are and if somehow we are being excluded, we should be, we may be required to have more clarity in federal statute to ensure that there cannot be such exclusions and that the Federal Reserve is overstepping its bounds, which I think, again, that should be bipartisan. I don't know how that's a partisan issue. Totally. So on to the topic du jour, the state. Stable Token Act, which we've spoken about a lot on this podcast, very excitedly. I think it would be tremendous for Wyoming to issue a stable coin. I think that would be a very popular product.

Tell us about the Stable Token Act. I think you'd introduce that in 2022 and then reintroduced and it was passed into law this year. What's the intent there? So again, getting back to discussions that we've had with stakeholders in ways to enable the adoption of digital assets and to further the industry. One of the challenges we've had along was this question. Would the state of Wyoming accept cryptocurrency X to pay taxes, to operate, to do things in the state of Wyoming with the state of Wyoming? And obviously with many cryptocurrencies, they're volatile. So what would end up having to happen, which would be sort of a wasteful implementation of the system, would be the state would have to receive a cryptocurrency, and then immediately liquidate it and turn into a dollar.

And that's non-optimal. That's not what we're aspiring to for a Web3 enabled state. What we're aspiring to is to be able to engage fully. So then you start looking to, all right, well, let's look at stable coins. What stable coin could we take? And in discussions, looking around at the assets underlying stable coins, while at a personal level, I'm comfortable with some of them. As a policymaker, it does not meet the sort of AAA level acceptance that a state needs to be accepting assets in

to engage in that commerce. So at that point, you start the conversation, all right, well, again, what would we take? What would it take to solve that? And that's where the Wyoming Stable token came from, which was a design of what would it take to meet Wyoming's needs to take a cryptocurrency, which we believe then would meet a lot of other entity's needs. And so we just designed it out, proof of reserve concepts, right? 100% instantaneous all the time. Auditing, make sure that you always know how many tokens there are, which is easy, but also what is the entire balance sheet underlying that asset at any given moment? And what is the risk associated with that asset? And then minimizing that risk, taking it as close to zero as possible. So the legislation

specifically allows only for treasury bills, so not even long-term treasuries, not like for dated treasuries. Yep, exactly. So that decreases the risk. We saw, you know, We saw challenges with 10-year bonds being an underlying asset, and the liquidity there is lousy. So making sure that we've got high liquidity treasuries. And then cash would be the only other thing that you could have. So you've got two options, you know, cash flow cash and U.S. Treasury bills. Once again, keeping with our theme of over-reserving, which we do with the Speedy Bank, whereas Speedy Bank's required to have 102% reserve instead of 100% reserve.

we drafted this so that it would be 102% reserved of the outstanding tokens. And again, when you contemplate the lifetime of that with regard to treasury bills, it should always be instantaneous asset positive so that under a full liquidation event, we would have a liquidation of over 100%. And if that's not quite right, if as we look at the cash flow, we'll readjust. just, right? That's the intent is to ensure that your instantaneous liquid asset has a value over 100. And then from the state's perspective, we are not bankruptable, right? So as long as it's a state asset, a state trust, which is how we established it, right? A Wyoming stable token would be a token that represents a U.S. dollar held in trust,

on behalf of the token holder by the state of Wyoming. So to be clear, we don't own the asset. The asset is held in trust by the state on behalf of the token holder, where the token represents ownership of the asset. That's very important. And it's different from stable coins, right? We use stable token differently than stable coin in a strict definitional sense because a token designates ownership,

where a coin designates the asset itself, which may have underlying assets to support it. So that's something that I try and carefully delineate because Wyoming is not the owner of the dollar. We didn't create a new currency, which is a violation of the U.S. Constitution. We are holding a dollar in trust on behalf of the token holder. It's there when you need it.

The dollar will be there, and we never spend that dollar. We never use that dollar. It can only be held in trust through the Treasury bill. or in cash on behalf. So we're trying to de-risk it to the point where we can get as close to zero risk as possible and really working through a lot of what we perceive as challenges out in the space where we see risk.

How can we as a state remedy that risk? And then we have some additional advantages, obviously, as being a state sovereign, where others are struggling, for example, with the SEC sending them letters. And then that letter means if you don't obey the letter, you'll go to jail. That's not really how it works with a sovereign state like Wyoming. And once again, the SEC doesn't get to send Wyoming to jail. They would have to prove that the state of Wyoming was actually violating a law before shutting us down, which is a much better position to be in.

And I think, again, getting back to additional motivations for this, it provides a great opportunity for a state to open doors for the private sector. in the stable coin, stable token space by forcing the SEC to actually, you know, use a legitimate fact set instead of just fear, intimidation and, and their ability to just stop you from doing something, whether it's right or wrong. So I know, I believe the law states this could exist as early as July this year, if I'm not mistaken, but is that right? Well, so as the law is written, it aspires to an issuance of a token

by December 31st of this year. We're going as quickly as we can, but at the end of the day, that 1.0 first token issuance, if we get it, is obviously going to be sort of a beta limited edition kind of thing.

We want this up and running, though, very soon. It's critical right now. I'm excited to get my hands on one. Yeah. In terms of the sort of the practical next steps. What needs to happen to make this a reality between now and the time that first token is issued? So we've had a couple of what are called stable token commission. So we established through the legislation, the Wyoming Stable Token Commission

that is responsible for getting this up and running. That commission, and this shows you how serious Wyoming takes digital assets, that commission is chaired by the governor. Governor Mark Gordon shows up and chairs that meeting. The Wyoming Treasury, Kurt Meyer is a co-member. The Wyoming auditor, Christy Rossinas, is a member. So the top three members of that Wyoming Stable Token Commission are three of our top live electives in the state of Wyoming, and they're the ones that show up to the meetings. They had the authority to appoint additional members, and so they've done that, a few members, up to seven. And that is the entity that is then responsible for getting this up and running and doing the exploration. So right now we're kind of in a process of characterizing the token and or tokens. I mean, realistically, the vision, although it's not explicit in the legislation, it does say one or more. As a state, we don't want to pick winners. That's not our thing. So the vision that we are coalescing around, you can imagine, is having several blockchains

that we consider to be robust blockchains that we issue tokens on so that we're helping to build up a variety of communities that are well-bedded and have a lot of stakeholders in them. We want to support a variety of them. I don't know what the token one will be issued on. We don't know that yet. But I'm hoping to get up to three different. chains very quickly so that it's clear that, you know, we're with everybody. We're not with any particular blockchain and then be very thoughtful about which chains to go on. We've talked also,

again, keeping risk down. We don't want to do any bridging ourselves. We don't want to do anything along those lines orself. We want to have as small of a role in the actual operation of a coin as we can because we're a state. You know, we don't want to take on any additional risk. So that's another component of what's going on with the commission, looking for the partners, looking for people to work with. Those commission meetings are public meetings, as are all of our select committee meetings. We take public input. Anybody out there is invited to provide input discussion, whether it's written or whether

it's sending me an email. I'm not hard to find. And again, trying to build this as well as we possibly can and bring on players that have experience in the stable coin space. We've had a great reception, as you can imagine, even from folks that are stable coin operators because they want this, they want this industry legitimized. They understand there's plenty of room for plenty of actors. We're not trying to crowd anyone out. I want to enable this space and at some point have a multitude of opportunities and options available with different features and different assets and different reasons why you might

want one over the other. We just want to open the door. And referring back to what you said earlier about diversifying the state's revenue sources, I mean, stable coin is, if it succeeds a financial, you know, fantastic product given that, you know, you basically keeping the net interest income. And you look at aggregate market cap of Fiat back stables, $130 billion today. And interest rates at 5% for short bonds. I mean, that's potentially a great revenue source for the state of Wyoming. Yeah, absolutely. There's a tremendous upside. And clearly, this is structured to return one dollar for every Fiat dollar in under all circumstances. But as we're investing in those bills, and as you know, right now those rates are good. They're not always good. But it will always pay the bills for the operation of it, no question. And in times like right now, there would be significant revenue if we were holding a large market cap of Wyoming stable tokens. And the legislation is drafted that it all goes into our schools. So we have a permanent fund for schools, K-12 schools in Wyoming, and these dollars would go into that fund that generates

revenue and perpetuity. So it will, it's for the kids. That's better than lining the pockets of tether executives, I suppose. That is true. That is true. Yeah. Nobody, nobody but kids education gets rits off of this if it's successful. So, um, One question I've been very curious about is from a permissionlessness perspective, would this stable token resemble the sort of existing crop of tokens in terms of, would you have to be whitelisted to use it, or would it just simply be a token that would circulate freely on a public blockchain? Yeah, so that's a great question that is still under discussion, right?

I have my inclination, which is, you know, full, flungibility, open, no requirements. That's the way I tend. I don't know that I'll win that. We'll see. And one of the things that got this legislation passed was the assurance that the executive branch would have the ability to work it through the commission and have their interests, Matt. So the take home there is I'm not sure. But having it be Wyoming rather than a state that tends towards. reducing civil liberties, right? I think we're the right state to be doing this in because

there is a tremendous underlying libertarian spirit, a tremendous underlying respect for privacy rights. And I think a lot of concern over the lack of anonymity and basically all of the downside to what we see from a Federal Reserve CBDC, we don't want that. So, that said there might be there might be some tradeoffs with regard to KYC AML and the Bank Secrecy Act that we somehow have to comply with so a lot of that's up in the air and honestly if anyone's listening

that's an expert in this space and has any any insight in terms of what they think needs to be done or has to be done Boy, that's an area where I'd like more input from a diverse group because I want to keep to a minimum of what we're required to do to not get this thrown out by the feds. Now, most importantly, have you designed the logo for the Stable Token and will have a bison on it? It will have a bucking horse and rider almost certainly. So the state of Wyoming is the Bucking Horse and Rider. It's University of Wyoming.

It's all things. We ship shipping containers around the world with the bucking horse and rider. So one way or another, it's going to have the bucking horse and rider steamboat. And yeah, I'm looking forward to that. That logo is going to be great. So you've been very generous with your time. I know you're extremely busy, but tremendously appreciate your input here. So I would say just lastly, when you reflect on your tenure on the select committee and your time in the Senate

and your efforts in the sort of digital asset space, what are your reflections on that? How do you feel about what you've achieved in terms of the bodywork so far and how the industry has responded to? Well, I'm very proud of what we've done through the Select Committee because I see it as being how government operates

when it does things the right way. And I say that because we're nonpartisan. We're open to the public. We invite ideas from stakeholders. We work together to craft solutions. And we're trailblazing. And most of the time when we do legislation and pass laws, we more often than not just copy and paste what somebody else has done. That's the best way to pass the laws is check for something that's tried and true.

We can't do that here. So this is all de novo. And I'm proud of the legislature for allowing us to do that. So we've got a lot of members that don't know anything about cryptocurrency and digital assets, but they have faith in us. They have faith in the legislators that are on this committee, that we're doing the due diligence and doing the right thing. And so they put that faith in us through their votes.

And then what we've done is we've come back with each significant piece of legislation and we've iterated, right? We've gone through it and gotten stakeholder feedback and done what is effectively bug fixes, right? I mean, we're more like a software development system than a traditional legislative system because we, you know, we do a feature freeze, we issue legislation, we collect bug reports, we do a bug fix bill, and then we issue the next generation of it.

And it's been a tremendously effective process that, as I mentioned, we've passed over 30 bills that have been just widely supported by the stakeholder community, and we've worked with incredible partners along this path. If we collectively, if legislators, the legislature and if if wouldn't it be nice at the federal level, they could operate this way where they're trying to produce a quality product first instead of a political victory. I think we'd get a lot more done. So last question, how should our listeners reach you if they want to provide feedback on any of these initiatives? What's the best way? So my email is easy. It's chris.roffis at wildedge.gov. My cell phone is a Google search away.

I don't know if you want to gift that out. As a Wyoming legislator, it's not exactly rocket science to get a hold of us. And please do. Again, these ideas and what we've been working on don't come from committee members. They come from the public and from stakeholders that have realized that they can actually reach Wyoming legislators. And, you know, it's a funny story. A little last anecdote. Christopher Allen, who's amazing.

He is one of the co-authors of TLS. and he's just a crypto and all things, all things security guru. He's from California. He tried to bring all of his expertise and knowledge and passion and advocacy to the California legislature and couldn't get past like tier one staffers.

I don't know, six years ago, he shows up to a meeting in Laramie, Wyoming, and he's been in every meeting since, either virtually or in person, and anytime I need that technical expertise, he's our guy that we go to as well as some experts from MIT Media Labs and Stanford and all. The world has engaged, and all it took was us picking up the phone.

I mean, that's really all it took. So to your listeners, we're interested. We're here to listen and understand what stake. holders need and understand maybe where we don't have things right, that constructive feedback is a big part of our process. So yeah, if you've got my name spelled correctly with two S's, Chris Rothfus, then you can certainly find all of my contact information pretty quickly, as well as any member of my committee. Well, Senator, it's tremendously inspiring to watch you work and your efforts to not go unappreciated in the crypto space. So thank you. And lovely having you on today.

It's been great. Appreciate the discussion.