A supervisory memorandum shared on 2 January by the Texas Department of Banking directed towards all cryptocurrency related businesses, addressed the subject of regulatory concerns for cryptocurrencies, and stablecoin licensing under the Texas Money Services.

The Banking Commissioner Charles G. Cooper made his case towards the existence of cryptocurrencies and identified them as an “electronic medium of exchange,” however, lacking the status of a “legal tender.”

Charles further highlighted the properties of different types of currency and emphasized the intrinsic zero value of cryptocurrencies as a vital characteristic outside the law. He said:

“A unit of cryptocurrency does not represent a claim on a commodity and is not convertible by law,” adding that there is “no governmental authority or central bank” that establishes its worth through “law or regulation.”

So far, cryptocurrencies have had intrinsic qualities determined by three essential processes: the cryptographic nature of the cryptocurrency, the mining process, and the applicable use case – especially where adopted as a currency by a group of backers.

The memorandum further explained the roles of third-party cryptocurrency exchanges that play important roles in creating liquidity functions for these perceived “new asset class.” The commissioner further said that according to some experts, cryptocurrencies can have relative characteristics of currency or commodity and sometimes neither.

The memorandum draws from the Finance Code section 151.301 and thereby defines the functions of each of the cryptocurrency categories according to the statutes. It would seem the financial watchdog may have been more interested in the business of sovereign-backed stablecoins as “money transmission” clause can be applied to them under the Money Services Act.

In line with this development, the document reads that: “A virtual currency business that conducts money transmission must comply with all applicable licensing provisions of Finance Code Chapter 151 and of Title 7, Texas Administrative Code, Chapter 33.” This, therefore, marks sovereign-backed stablecoins for licensing purposes in Texas, and therefore pursuant of such venture within the jurisdiction must comply with the legal procedures.

An important reason why the license is required is due to the nature of cryptocurrencies, as there is no centrally moderating body to ensure that risks are averted. Therefore, due to associated risks of the emerging cryptocurrency status, be it as a currency, or a commodity, as far as sovereign-backed stablecoins are concerned “it is incumbent on a license applicant to demonstrate that all virtual currency is secure while controlled by the applicant” the document reads.

Licensing is becoming an important operational requirement for most exchanges, and while some exchanges have been shut down for the lack thereof, others are gaining favor with financial watchdogs from different jurisdiction in order to operate their businesses.

Switzerland’s Financial Supervisory Authority (FINMA) has new planning in place which will allow cryptocurrency exchanges to behave like the country’s banks, in that they will be able to hold public deposits of up to CHF 100 million (USD 100.5 million) under a new license to be made available later this year.


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