Bitcoin
$37,943.65+2.21%
Ethereum
$2,056.85+1.64%
Binance Coin
$228.84+0.64%
XRP
$0.61029863+0.97%
Solana
$57.11+3.74%
Cardano
$0.38461501+1.19%
Dogecoin
$0.08013353+2.20%
Tron
$0.10309102-0.92%
Toncoin
$2.47+1.15%
Chainlink
$14.46+1.15%
Avalanche
$20.540.00%
Polygon
$0.74734695+0.41%
PlayIconNav
Crypto Prices CoinDesk Market Index CoinDesk Market Index
Markets

New Texas Memorandum Outlines Initial Bitcoin Exchange Guidelines

A new memorandum from the Texas Department of Banking clarifies regulatory rules for state bitcoin exchanges.

By Stan Higgins
AccessTimeIconApr 3, 2014 at 10:38 p.m. UTC
Updated Dec 10, 2022 at 8:00 p.m. UTC
Texas

10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now
The Texas Department of Banking has released a supervisory memorandumhttp://www.dob.texas.gov/lg_manual/sm1037.pdf outlining its regulatory stance on digital currencies within the guidelines set by the Texas Money Services Act.

The document draws a line of distinction between bitcoins and other digital currencies and sovereign currencies like the dollar. According to the memorandum, digital currencies are not recognized as legal tender in Texas because they lack backing from an institution like a central bank, do not have intrinsic value and do not carry any guarantees of redemption.

Overall, the statements clarify the statutes which govern the establishment of third-party bitcoin exchanges that handle sovereign currencies, providing a clearer path for those who might seek licensure in Texas.

As a result, the exchange of digital currency and sovereign currency does not qualify as a money transmission:

"Because cryptocurrency is not money under the Money Services Act, receiving it in exchange for a promise to make it available at a later time or different location is not money transmission. Consequently, absent the involvement of sovereign currency in a transaction, no money transmission can occur."

The memorandum likens the purchase or sale of bitcoins or other digital currencies to a transaction involving a commodity or product, stating:

"Exchange of cryptocurrency for sovereign currency between two parties is not money transmission. This is essentially a sale of goods between two parties. The seller gives units of cryptocurrency to the buyer, who pays the seller directly with sovereign currency. The seller does not receive the sovereign currency in exchange for a promise to make it available at a later time or different location."

The memorandum notably follows the 11th March news that New York would accept applications for bitcoin exchanges, and suggests that more states may be following its lead.

Implications for exchanges

Daniel Wood, assistant general counsel for the Texas Department of Banking, explained in an interview with CoinDesk that the regulations focus primarily on businesses that operate exchanges and handle sovereign currencies.

"Under the money transmission and currency exchange statutes, there is no direct regulation of cryptocurrencies. So for a company that wants to, say, start up an exchange site, the question for us will always be: what do you do with, and how do you handle sovereign currency?"

"Our statutes define money and currency very narrowly," he added.

Community reaction

Steven Wilkinson

, co-founder and treasurer of the Texas Bitcoin Association, said in an interview he sees the clarification of money transmission rules as a way to better govern the behavior of third-party exchanges.

"[Regulation] will keep third-party exchanges doing what should be proper and right, and we can avoid the Mt. Gox issue."

He went on to state that he thinks of the rule clarification as one part of a broader regulatory evolution in regards to digital currencies, both in Texas and beyond.

"I think it's more of a first step. Texas is a large player. It's really gonna be who else comes along with this particular way of thinking, which I think is the proper way of holding new technology. But, I definitely see this as a step in the right direction instead of as just another step into the fog."

US regulation taking shape

The Department's release follows guidance from the Internal Revenue Service that bitcoin will be treated as property for tax purposes. The decision has prompted some to criticize the way in which these rules will impact small transactions of bitcoins.

Exchanges based in China are also beginning to feel pressure from state regulators, though in a more negative way.

For example, Huobi announced on 3rd April that it would halt voucher deposits. On 2nd April, BTC38 announced the suspension of fiat-to-digital currency trading while FXBTC and OKCoin both detailed complications involving their payment processors.

Image credit: Blanscape / Shutterstock.com

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish, a cryptocurrency exchange, which in turn is owned by Block.one, a firm with interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets including bitcoin and EOS. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.