Texas Might Mandate Licensing for Stablecoin Issuers

In the United States, both federal and states laws classify Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term at various levels. While many states are friendly to the new industry, others are not that comfortable with its citizens investing in an unregulated financial sector.

Texas, which is thought to be one of the friendly states towards the Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term companies, is now seeing stablecoins as “money” under the Texas Department of Banking’s updated guidelines and might require a license for issuing the same.

Stablecoins are dollar-pegged coins, which mean for every issued digital coin, the issuer needs to put a dollar in its currency chest. This industry became very lucrative and flourished as most of the crypto exchanges including the major ones are making these stablecoins as their base currency for crypto trading to ignore the heavy restrictions involved with fiat-based trading.

The memo published by Charles Cooper, commissioner of Texas Banking, details how federal and state laws, should see the digital coins emphasizing the assessment of fiat-backed stablecoins.

“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,” the memo stated.

Crypto is Not Money

This recent memo is an updated version of the one issued in 2014. Cooper then declared that the state of Texas does not consider cryptocurrencies as “money” and any exchange of cryptocurrencies for fiat does not fall under “currency exchange.” This allowed the crypto exchanges to operate from the state without acquiring any license to conduct currency transactions.

“However, when a cryptocurrency transaction does include sovereign currency, it may be money transmission depending on how the sovereign currency is handled. A licensing analysis will be based on the handling of the sovereign currency,” the updated memo further noted.

A Crypto Hub

The liberal laws in the lone star state have gained the attention of many international players willing to enter the US market. Last year, Finance Magnates reported that the crypto mining giant Bitmain is planning to open a new data center in Rockdale, a small town in the state.