Texas Financial Watchdog May, with Respect to Licensing Purposes, Recognize Stablecoins as Money
According to a supervisory memorandum published on January 2, the Texas financial watchdog might consider Stablecoin as money, and after reading some of licensing requirements...
According to a supervisory memorandum published on January 2, the Texas financial watchdog might consider Stablecoin as money, and after reading some of licensing requirements and Texas laws, push banks and exchanges to trade with them.
Stablecoin is a cryptocurrency with the stable and unchanging price. The market determines the price of cryptocurrencies based on supply and demand, and yet stablecoins are looking to achieve stable price. In the current condition of unstable monetary systems and limiting controls of capital, decentralized cryptocurrency which is always available and has a stable price would be a good alternative.
Unofficial supervisory memorandum number 1037, which was published by the financial watchdog, examines the regulatory rules of cryptocurrencies under Texas Money Services Act and addresses current trends in the field, including the introduction of stablecoins to the market.
Stablecoins, also known as stable currencies, are a kind of centralized cryptocurrency backed by the issuer with conventional currency, precious metals and sometimes algorithms.
This Act states that receiving a government-backed Stablecoin in return for a “promise” in exchanges, with the intent that it will be available in the future or a different location, is recognized as a money transfer. Therefore, a government-backed Stablecoin could be considered money or monetary value which is under the Money Services Act.
It is stated in this document that a licensing analysis will determine whether the holder of the Stablecoin will be granted the right to redeem it for sovereign currency or not, and this claim can turn into money or monetary value. This is true regardless of whether the licensed issuer explicitly issued the right to redeem or not.
Generally speaking, with regard to the status of cryptocurrencies in Texas, it is postulated in this document that cryptocurrency is not considered money under the Money Services Act; thus receiving it in the same condition as stablecoins is not considered money transmission.
It is further stated in this supervisory memorandum that:
“However, when a cryptocurrency transaction does include sovereign currency, depending on how the sovereign currency of the country will handle it, it may be money transmission, and a licensing analysis will be based on the handling of the sovereign currency.”
As the news website Cointelegraph, Coinbase previously reported it, a major U.S. cryptocurrency exchange in the state of Wyoming, ceased all operations in this state after they fell under money transmission license restrictions. This license had been suspended since mid-2014 because of provisions in state law that made it mandatory for all exchanges to double reserve the digital assets of state residents with fiat currency (unbacked currency); yet, in March of 2018, Wyoming state legislature passed bill 19 regarding the exemption of virtual currencies from this state’s money transmission Act.
Unbacked currency, which is also known as fiat money or regulatory money, is a currency without intrinsic value, and its value is determined only based on government order and regulation.
This bill allows Coinbase to apply for this license, under which it can take up its business again as a complaint and regulated exchange.