As per the Supervisory memorandum reported on 2nd January, there may be a probability of considering the stablecoin under the category list of money by the Texas Department of Banking, thereby requiring the stablecoins and the exchanges that handle them subject to various applicable Texas laws and license requirements.
The characteristics of Stablecoins are similar to centralized cryptocurrency which is supported by the issuer with conservative currency, expensive metals, and occasionally algorithms
The Supervisory Memorandum – 1037, released by the financial regulator, inspects the regulatory behavior of the digital currencies under the Texas Money Services Act and manages the ongoing happenings in the digital field in addition to the introduction of stablecoins in the market.
The Act states that the activity of receipt of a sovereign-backed stablecoin in exchange for “a promise” to make it available in the near future or in a diverse location may be termed as a money transfer. Further, due to this feature, as per the Money Services Act, a sovereign-backed stablecoin may be recognized as money or monetary value. The document quotes that “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 of whether the redemption right is expressly granted or implied by the issuer.”
However, the document mentions that cryptocurrencies in Texas are generally not categorized as money as per the “Money Services Act,” and hence the receipt of the same under similar circumstances and conditions will also not be termed as money transmission.
The document further states that “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.”
In Aug 2018, Coinbase had exited the business in the Wyoming state as its operations were assumed to be categorized under the money transmission license restrictions. Earlier in Mid 2014 Coinbase’s license had got suspended due to provisions in the state law that required all the exchanges to have twice the value of digital assets as a reserve in the form of fiat currency.
Later in March 2018, a House Bill 19 was passed by the Wyoming state legislature where it laid down the exemption of virtual currencies from the Wyoming Money Transmitter Act, thus allowing Coinbase to apply for a license through which it will be able to resume its operations.