What is Special Purpose Depository Institution (“SPDI”)?

Wyoming has always been one of my two favorite states and this is based on both the natural beauty and the freedom oriented nature of it’s residents. For the past few years we have been hearing about the state of Wyoming’s foray into being a pro-Bitcoin state. Bitcoin and Crypto legislation began being introduced in Wyoming in 2018 and 2019. One of the benefits of this Wyoming legislation is that it enabled Special Purpose Depository Institutions (SPDI’s) in the state. On the Wyoming state website they explain what it is:

Wyoming-chartered special purpose depository institutions (“SPDIs”) are banks that receive deposits and conduct other activity incidental to the business of banking, including custody, asset servicing, fiduciary asset management, and related activities.

SPDIs will likely focus on digital assets, such as virtual currencies, digital securities and digital consumer assets. For example, SPDIs may elect to provide custodial services for digital assets and, in accordance with customer instructions, undertake authorized transactions on behalf of customers. SPDIs may also conduct activity under Wyoming regulations tailored to digital assets, which address issues such as technology controls, transaction handling, and custody operations for digital assets. As a final example, SPDIs operate under Wyoming law that defines digital assets in conjunction with the Wyoming Uniform Commercial Code and describes, among perfection and priority of security interests in digital assets.

SPDIs may focus on traditional assets as well. They also may serve as a vehicle for business cash management, operational accounts, and any other purpose permitted under applicable law. However, SPDIs are generally prohibited from making loans with customer deposits of fiat currency and they must at all times maintain unencumbered level 1 high-quality liquid assets valued at 100% or more of their depository liabilities. Given this, SPDIs are not required to obtain insurance from the Federal Deposit Insurance Corporation—though they may do so.”

An example of an SPDI is Custodia Bank (Custodia Bank), which of course, is based out of Wyoming. Of note is a comment letter that they sent to the BIS (Bank of International Settlement) and this is the money quote:

“It is a fact that legacy payment systems are already in competition with internet-native payment protocols, which enable their users to settle payments outside banking systems. By one estimate, to date approximately 3% of U.S. bank deposits have already migrated to the crypto industry – and that happened mostly before technology to scale these protocols arrived. But it has now arrived (it’s called the Lightning Network, which is a Bitcoin layer 2 protocol. Its throughput capacity roughly equals that of Visa, and payments made over Lightning cost virtually zero). This means regulations implemented today that block banks from adopting the new protocols, as they scale and as customers increasingly demand them – including to use them as payment rails for fiat currency – could turn out to have the unintended consequence of costing the banking industry dearly, as fintechs and broader technology companies simply go around banking systems to settle payments.”

So Custodia bank is an example of an SPDI that merges the ability to custody digital assets such as Bitcoin (BTC) with Fiat currency deposits. The ‘times are a changing’ and all of the pieces are falling into place for a viable alternative system and a legal, alternative system is exactly what we need now due to the corruption and tyranny that is raging all around us.  This legal, alternative system (Bitcoin) may be your escape hatch when the Central Bank Digital Currency (CBDC) finally arrives. We believe that once Americans realize how tyrannical the CBDC system will be they will want to  flock to Bitcoin. But at that time it may be too late as the Federal Reserve (which is not Federal and doesn’t have any reserves) will be able to directly control your purchases.  So you may just be too late at that point and you will likely feel like a trapped rat and a dumb bastard. And that is exactly what you will be for not paying attention to what is going on around you.  

So  it is our belief that freedom minded people should start now in becoming familiar with Bitcoin and Blockchain Technology as neither one is going away (unless the internet does). We are here to assist your business in integrating Bitcoin Transactions into your existing systems. Please give us a call for expert assistance.

For a refreshing interview you can hear Wyoming Senator Cynthia Lummis discuss her views on Bitcoin at the recent interview below:

Wyoming Senator Cynthia Lummis: “Among all the Currencies, Bitcoin is going to emerge as the gold standard”

It is wonderful to hear that one of the reasons she believes in Bitcoin is that it can’t be stopped by a government. How is that for a freedom oriented Senator?

The team at Blockchain Advisors wish you and your family a very Merry and Holy Christmas.