Issuers Of Stable Coin May Need Licenses To Operate In Texas

According to amended directive from the State Department of Banking, Stablecoins may meet the criteria of “money” under Texas law. A memo distributed by Texas Banking Commissioner Charles Cooper on Wednesday outlines how cryptos should be treated in agreement with local and federal regulations, including facts on how sovereign or fiat-backed stablecoins can be assessed.

The direction is based on a preceding memo issued by the State in 2014, which explained how cryptocurrency companies functioning in Texas should transact with the rising asset class. As in the earlier version, Cooper notes that cryptocurrencies are not treated as money under Texas law and that the conversion of cryptocurrencies for fiat does not add up as a “currency exchange.”

Therefore, startups do not have a need to acquire currency exchange licenses to conduct business–making the Lone Star State one of the most lenient in the country.

In the revised edition, however, Cooper adds that stablecoins may come under prevailing definitions of “money” or “monetary value,” and therefore anybody who acquires the stablecoin is at liberty to the sovereign currency assets underlying the tokens that they have.

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.

Specifically, the document outlines Texas’ banking policy on numerous forms of crypto transactions, including crypto-crypto conversions and crypto-fiat dealings. The record also explains how the straight transfer of cryptocurrencies from one party to another does not meet the criteria of money transmission.

It 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.”

However, it can be examined whether a stablecoin issuer or an exchange owes a holder fiat currency. Cooper ends his report by warning exchanges and other start-ups that they must follow relevant laws, especially when transferring money.