The Texas Department of Banking has published new guidance regarding the regulatory treatment of virtual currencies under the Texas Money Services Act. The document states that most transactions involving cryptocurrencies will not be considered a transfer of “monetary value” but the exchange of virtual currencies for fiat will likely be recognized as a “money transmission.”
Texas Department of Banking Updates Regulatory Position on Crypto Transactions
On Jan. 2, the Texas Department of Banking published a supervisory memorandum providing updated regulatory guidance regarding the treatment of cryptocurrencies under state law.
While the memorandum notes that bitcoin and cryptocurrencies have “sparked new discourse on the nature of money” and the “transferability of value,” the document emphasizes that it seeks only to express the department’s interpretation of the Texas Money Services Act as it pertains to activities involving cryptocurrencies under existing statutory definitions.
Guidelines Classify Virtual Currencies as ‘Centralized’ or ‘Decentralized’
The guidelines classify cryptocurrency according to their centralization, with decentralized virtual currencies described as not have been “created or issued by a particular person or entity,” in addition to having “no administrator, and no central repository.”
Centralized virtual currencies, the document states, are defined as having been “created and issued by a specified source,” adding that “they rely on an entity with some for authority or control over the currency.”
Stablecoins are described as comprising a “subclass” of centralized virtual currencies. With regard to money transmission regulation, the memorandum states that “an important aspect” of stablecoins that are backed by sovereign currencies is the “redemption right that allows the stablecoin holder to redeem the coin for fiat currency from the issuer.”
The memorandum adds that “Some experts consider cryptocurrency to be a new asset class that is neither currency nor commodity,