Crypto-related businesses operating within the Southern U.S State of Texas will enjoy some regulatory certainty at the turn of the new year. The region’s department of banking on Jan. 2, released a piece of a document explaining their stance on the new-asset class.
The supervisory memorandum which was authored by Banking Commissioner Charles G. Cooper defined cryptocurrencies as an “electronic medium of exchange” but reckoned that they lacked attributes required of a legal tender.
According to the official, the missing attributes include the fact that no governmental authority or bank is in charge of creating laws or regulations for the currency. To this respect, the memorandum based its rule on two classifications for cryptocurrencies.
It defined a central cryptocurrency as one that is issued through a single source, citing stablecoin Tether (USDT) as an example. On the other hand, Bitcoin, Ethereum, XRP, and Litecoin were regarded as decentralized cryptocurrencies since no single entity is in charge of the network or protocol.
Texas Department of Banking Crypto Regulation Overview
As part of regulation stipulated for centralized cryptocurrencies like stablecoin, the memorandum wants companies issuing the fiat-backed asset to acquire a license in line with the State’s Money Services Act.
The document plainly stated that “it is incumbent on a license applicant to demonstrate that all virtual currency is secure while controlled by the applicant.”
In simpler terms, the company behind the stablecoin must show that they have enough assets to back their stablecoin supply. The department practically adopted this regulatory strategy in light of recent issues surrounding stablecoin issuers Tether Ltd.
Other regulatory standards set out for stablecoin issuers (money transmitting companies) include security assessment of their computer systems and a net worth that can be pegged anywhere between $500,000 to $1,000,000.
For decentralized cryptocurrencies such as Bitcoin, the document explains that the exchange of such the digital token for sovereign currency is not money transmission. Also, exchanging one cryptocurrency for the other is not a form of a monetary transaction since no sovereign currency is involved.
For cryptocurrency exchanges and traders, the department of banking says "no currency exchange license is required in Texas to conduct any type of transaction exchanging virtual with sovereign currencies.”