New Texas Department of Banking Policies May Require Stablecoins Creators to Gain Licensing Approval
Updated Policies With Texas’s Department Of Banking May Require Stablecoin Issuers To Gain Licensing Approval
Cryptocurrency is categorized into many different classifications on a federal level and state level. However, other than New York, most other states require no additional approval to allow platforms to function within their separate economies. Based on a recent change in the guidance for Texas’s Department of Banking, requirements for stablecoins to be licensed may soon come to fruition.
On Wednesday, Texas Banking Commissioner Charles Cooper released a memo that showed the new way that the government plans to treat cryptocurrencies at a local and federal level. There is a particular focus in that memo about the ways that stablecoins, considering their backing by fiat currency, may be assessed.
The document notes,
“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. This is true regardless whether the redemption right is expressly granted or implied by the issuer.”
This release is a follow-up to a former memo four years ago that proposed a way for crypto assets to be treated within Texas by crypto companies. Just like the former memo, Cooper commented that Texas law would not dictate that cryptocurrencies in general would not count as a “currency exchange,” which means that startups were exempt from the need to be licensed.
Now that the new memo has been released, Cooper clarified that stablecoins may be classified with “monetary value,” considering their direct connection to the dollar. According to Cooper, this is due to the fact that “the issuer has taken on the obligation to provide sovereign currency in exchange for the stablecoin at a later time.”
The banking policy centers around the different types of crypto transactions and how it does not technically mean that the interaction is a money transmission. Continuing, the policy states,
“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 a money transmission.”
As far as if an exchange actually owes fiat currency to the user with the issuance of a stablecoin, “a licensing analysis” may occur.
Wrapping up the latest memo, he issued a warning to the exchanges and other startups in the crypto space, saying that it is important to pay attention to the current laws in their operation, especially for money transmissions.
Coinbase chose to withdraw from operation within Wyoming, when they were found to fall under the jurisdiction of money transmission license restrictions. Their license in the state has been suspended for four years now. After House Bill 19 passed to except virtual currency from those policies, Coinbase reentered with a new license application for operation.