Stablecoin Issuers May Need Texas License

| Publish date: 01/06/2019

It seems Stablecoins may have what it takes to qualify as “money” under Texas law. This interesting turn of events is detailed via the updated guidance courtesy of the state Department of Banking. Now, it is interesting to just how much significant this would bring.

How Cryptocurrencies Should Be Treated

A memo published Wednesday by Texas Banking Commissioner Charles Cooper outlines how cryptocurrencies are to be treated under local and federal regulations. In particular, it would add details of how stablecoins backed by sovereign, or fiat, currencies may be assessed.

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The guidance will reportedly build upon a previous memo released by the state in 2014. It is worth noting that the memo best described how digital currency companies with operations in the aforementioned state should treat the nascent asset class.

As in the previous version, Cooper notes that digital assets are not treated as money under Texas law. As for exchanging cryptocurrencies for fiat is concerned, it does not necessarily count as “currency exchange.” With that said, startups are not really obliged to obtain currency exchange licenses in order to conduct transactions. Ultimately, this makes the Lone Star State one of the nation’s most permissive yet.

Under Current Definitions Of ‘Money’

However, in the revised version Cooper adds that stablecoins may fall under existing definitions of “money” or “monetary value.” As such, it is safe to assume that anyone who buys the stablecoin has a claim to the sovereign currency assets underlying the tokens they possess.

This is “because the issuer has taken on the obligation to provide sovereign currency in exchange for the stablecoin at a later time,” Cooper writes.

Warning to Comply

The document specifically outlines Texas banking policy on different forms of digital currency transactions. This already includes all crypto-to-crypto exchanges and crypto-to-fiat exchanges. Moreover, it refers to how directly transferring cryptos from one party to another does not qualify as money transmission.

The document further adds:

“In contrast, because a sovereign-backed stablecoin may be considered money or monetary value under the Money Services Act, receiving it in exchange for a promise to make it available at a later time or different location may be money transmission.”

Whether a stablecoin issuer or exchange actually owes a holder fiat currency may be dependent on analysis, however. Cooper concludes his memo by warning exchanges and other startups that they must comply with relevant laws, especially if they are to perform money transmission.


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