Stablecoin issuers to soon need licenses in Texas

The Texas Department of Banking is considering to qualify stablecoins as “money”, more such details were revealed in a Supervisory Memorandum published on January 2.  The memo was published by Texas Banking Commissioner, Charles G. Cooper.

The financial watchdog published the memorandum titled ‘Supervisory Memorandum – 1037’ which examines how digital currencies can be regulated under the Texas Money Services Act. The memo stated that the new act applies to, “All Virtual Currency Companies Operating or Desiring to Operate in Texas.”

The memorandum showcases the ongoing trends and highlights the issue of stablecoins in the market. It further aims to regulate all the cryptocurrencies under the Money Service’s Act, contemplating that stablecoins can be backed by various other commodities like fiat currencies, metals or cryptocurrencies.

The memorandum highlighted the growth in popularity of Bitcoins and spoke about the transferability of value changing with the invention of digital currencies. The memo was published  outlines that the “memorandum seeks only to establish the regulatory treatment of virtual currencies under existing statutory definitions.”

Under the existing act, receiving currencies in exchange for “promises” to make it available at a later time, or a different location can be counted as money transmission. However, a state-backed stablecoin may be considered as money under the Money Services Act.

The memo stated that the new act applies to, “All Virtual Currency Companies Operating or Desiring to Operate in Texas.”

The document further states about licensing analysis as:

“A licensing analysis will turn on whether the stablecoin provides the holder with a redemption right for sovereign currency thus creating a claim that can be converted into money or monetary value.”

Recently, Bitmain had set up a data center in the state of Texas. The mining device manufacturer had announced its plans of setting up a $500 million blockchain data center in August 2018.

In March 2018, Wyoming had barred operations for Coinbase exchange from operating within their state. The exchange firm was supposedly falling under the state’s restricted policies. With the passing of the bill, exempting digital currencies from Money Transmitter Act. This allowed Coinbase to apply for a license and resume operations in the state.

Charles Cooper concluded the memo with a warning to cryptocurrency exchanges and startups, as they must comply with the laws abiding by money transmission