San-Francisco based bitcoin exchange Coinbase will be soon stop servicing customers in the state of Wyoming due to Wyoming Division of Banking’s regulatory standards that will make business in that state impractical, the company stated on their blog.
The announcement reads:
“Coinbase is indefinitely suspending its business in Wyoming.”
The state’s recently introduced Wyoming Money Transmitter Act requires services to hold a 25% fiat reserve in order to operate by law. This means they must cover at least a quarter of the amount of reserves in fiat.
With bitcoin being a relatively volatile asset it would be difficult to manage this task. Each licensee must maintain a surety bond or trust account in US dollars for the benefit of its customers. The bond is form of insurance that users must pay an annual premium to maintain, and thus, Coinbase believes it is too costly to continue business in Wyoming with this asset rule set in place.
“The Wyoming Division of Banking has recently communicated regulatory policies which we believe will render continued Coinbase operations there impractical,” the company explained. “In particular, we understand that the Wyoming Division of Banking interprets the Wyoming Money Transmitter Act to require licensure of entities which offer hosted bitcoin wallet services, and that as a condition of such licensure, licensees must maintain dedicated fiat currency reserves in amount equal to the aggregate face value of all bitcoin held on behalf of customers.”
The company added:
“Although Coinbase securely maintains 100% of all customer bitcoin, it is impractical, costly, and inefficient for us to establish a redundant reserve of fiat currency in equivalent value.”
Coinbase sent out emails to its users notifying that services will end in Wyoming in thirty days with no immediate plans to restore services anytime soon, stating:
“We understand this suspension will inconvenience our Wyoming customers and we apologize that we cannot currently project if or when our services may be restored.”
In a post made on Reddit about the subject, many users were concerned on how this would affect Coinbase services in New York With the BitLicense revealed, things could get tougher for businesses offering brokerage services.