Stablecoin issuers may need licenses in Texas, unlike most of Crypto's startups


Stablecoin can qualify as "money" according to the Texas law, according to the updated guidelines of the Bank's State Department.

A memorandum published Wednesday by the Texas Banking Commissioner, Charles Cooper, illustrates how cryptocurrencies should be treated according to local and federal regulations, in particular adding details on how to evaluate stablecoins backed by sovereign or fiat currencies.

The guide is based on a previous note released by the state in 2014, which describes how the cryptocurrency companies with operations in Texas should treat the nascent asset class.

As in the previous version, Cooper notes that cryptocurrencies are not treated as money under Texas law, and the exchange of cryptocurrencies for Fiat does not count as "currency exchange". As such, startups do not need to acquire foreign exchange licenses to conduct transactions in the State of the Lone Star, one of the most permissive in the nation.

However, in the revised version, Cooper adds that stablecoins can fall within the existing definitions of "money" or "monetary value", and therefore anyone who purchases the stablecoin has a right over the sovereign currency assets underlying the tokens he owns.

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

Be careful to comply

The document specifically outlines Texas banking policy on various forms of crypto transactions, including crypto-cryptographic exchanges and crypto-fiat exchanges. The document also underlines how the direct transfer of cryptocurrencies from one side to the other does not qualify as the transmission of money.

Adds also:

"On the contrary, since a stablecoin can sovereignly be considered money or monetary value under the Money Services Act, to receive it in exchange for a promise to make it available at a later time or in another place could be the transmission of money."

However, the fact that an issuer or a stationary exchange is debtor of a legal tender currency may depend on the analysis.

Cooper concludes his memorandum advising the exchanges and other start-ups that must comply with the relevant laws, in particular if they transmit money.

Image of Fiat currencies through Shutterstock

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