The Texas Department of Banking, a state agency whose mandate is to ensure that Texas “has a safe, sound and competitive financial services system”, has put out a Supervisory Memorandum which “expresses the Department’s interpretation of the Texas Money Services Act 1 and the application of its interpretation to various activities involving virtual currencies.”
The document, after giving a well-written overview on virtual currency, then makes its first analysis with regards to currency exchange. Because it isn’t issued by a government, operating a virtual exchange service does not require a license as would be required by the appropriate statute under the Texas Finance Code for regular currencies. This may soon differ with New York which may soon require a “Bitlicense” for such.
The same applies to money transmission licensing. Virtual currencies do not constitute “money or monetary value” as no government has any obligation to honor them, for example, in the “payment of all debts, public charges, taxes, and dues”.
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However, when a sovereign currency is involved in some way, it may be considered money transmission depending on how it’s handled: The exchange of cryptocurrency for fiat between two parties is not transmission, rather the sale of goods. Certainly, exchange of two different cryptocurrencies and the transfer of stand-alone cryptocurrency are not considered money transmission.
However, a third party facilitating the exchange of cryptocurrency for fiat is deemed to be transmitting money. If facilitated through an ATM, it is usually considered money transmission if connecting buyer and seller through an exchange. If however, the trade is made between the operator and the client without engaging a third party, then it is not money transmission.
If considered money transmission and the business operates through the internet, then its minimum net worth must be at least $500,000, which may increase to $1,000,000 in the future. A third-party audit of all relevant computer systems is also required.