Cryptocurrency investing has taken off in the United States this year. And the race is on for states to attract the crypto industry as various parts of the country compete for the crypto crown. But which states are ahead of the crypto curve?
We looked at several factors, including regulation, infrastructure, and general interest to uncover which states are best for crypto investors.
California is working hard to attract the cryptocurrency industry. If Bloomberg’s analysis of crypto jobs is anything to go by, it’s succeeding. San Francisco and Los Angeles both had some of the biggest shares of total crypto hires this year. Popular cryptocurrency exchanges like Kraken and Coinbase are headquartered in San Francisco, though Coinbase has said it will close its San Francisco office in 2022.
The Golden State also won the title of most crypto-ready state in research by Crypto Head. It has 2,473 crypto ATMs — more than anywhere else in the country. Californians also seem to have the most online interest in crypto.
However, things may change next year. California has created an Office of Financial Technology and Innovation, which will take the lead on creating new crypto-specific rules. The new office is charged with encouraging consumer-friendly innovation and job creation as well as cracking down on unhelpful crypto practices.
Wyoming has some of the most crypto-friendly regulations in the United States. It has approved over 20 laws to make it easier for crypto businesses to operate. These include exempting crypto from normal money processing rules and making crypto transactions free from state taxes.
It even approved a new crypto banking charter, which enabled Kraken to open Kraken Financial — the first U.S. crypto bank — in the state. Another crypto bank, called Avanti, opened in Wyoming at the end of last year.
Miami’s mayor, Francis Suarez, and Florida’s governor, Ron DeSantis, are both championing Florida’s crypto credentials. Most recently, DeSantis proposed the state accept crypto payments toward certain state taxes.
Suarez has championed MiamiCoin (MIA) — a crypto created by a company called CityCoins that gives 30% of its revenue to Miami. Suarez wants to use the yield from the coin to pay a dividend to Miami residents, amongst other things. The mayor is also already collecting his wages in Bitcoin (BTC) and is pushing hard to make Miami a crypto hub.
Texas is another contender for the crypto crown, with pro-crypto laws and low energy costs proving particularly appealing to the Bitcoin mining industry. The state is luring miners with tax credits, training, and other incentives. Though there are already concerns about whether Texas’s energy grid can handle the demand.
This year, the state passed several bills to improve the regulatory framework for crypto, including a bill that recognizes the legal status of cryptocurrencies and paves the way for banks to provide custody services for cryptocurrency.
Colorado passed various bits of legislation that are similar to Wyoming’s blockchain rules back in 2019. Indeed, Colorado’s high crypto usage and crypto-friendly laws pushed it into our list of top crypto states.
Its pro-crypto governor, Jared Polis, said in May that he wanted the state to be the first to accept crypto tax payments, though there’s been little news on that front since.
Crypto friendliness has its downsides
Many people might argue that these crypto-friendly approaches aren’t necessarily a good thing for investors or residents. For example, Wyoming’s tax breaks for crypto transactions mean the state’s coffers don’t benefit from the booming crypto industry there.
And from an investor point of view, critics want to see rules that protect investors against certain unsustainable practices and bad actors that have sprung up in the market. They argue that more permissive states open the way for more potential abuses.
New York probably has the strictest crypto rules in the United States. But this also means residents benefit from a greater level of investor protection. For example, trading of the much-criticized stablecoin Tether (USDT) is not allowed in New York. This is arguably a good thing because Tether may not have enough cash in reserve to support the coins it has issued and investors could lose money if the coin collapses.
Increased regulation at a national level is now inevitable, though it isn’t clear what shape it will take. In the meantime, a lot is down to individual states — and the states above have truly opened their doors to the cryptocurrency industry.