Wyoming Sen. Lummis: Fed's delay in approving Wyoming blockchain bank 'broke the law'

Republican Senator Cynthia Lummis of Wyoming believes that the Federal Reserve’s delay in processing applications for crypto-native banks to open accounts with the central bank “violates the law.”

In a Nov. 30 op-ed for The Wall Street Journal, Lummis claimed that the Fed was unfairly treating her state’s special purpose depository institutions (SPDIs), also known as “blockchain banks.” She called on her Republican colleagues not to support Federal Reserve Chairman Jay Powell, who was reappointed by President Joe Biden on Nov. 23.

In February 2019, the Wyoming legislature authorized SPDI to serve businesses that cannot obtain banking services from the Federal Deposit Insurance Corporation (FDIC) because they process crypto transactions.

In 2020, two Wyoming special purpose depository institutions, Kraken and Avanti, received banking licenses. Soon after, they applied for a master account with the Kansas City Federal Reserve Bank. Their applications have not yet been approved.

The state has been debating whether SPDI should be considered a bank under federal law. In the article, Lummis asserts that there is "no question" that SPDI should be considered a bank under federal law and that "Wyoming has checked in every respect." She added that SPDI meets the bank composition standards set by Congress in the Federal Reserve Act.

"In fact, it is against the law for the Fed to delay approval to issue SPDI," she said, citing a federal court claim that the Fed "has a duty to make the payment system available to all banks and credit unions that conduct lawful activities."

Documents filed by Lummis on Oct. 7 show that she purchased an undisclosed amount of bitcoin on Aug. 16, worth between $50,001 and $100,000.

The bitcoin purchase comes less than two weeks after Lummis and other senators attempted to drum up support for a pro-cryptocurrency amendment to President Joe Biden’s infrastructure bill.

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