Texas Clarifies that Stablecoins Backed by Sovereign Currency Qualify as “Money” Under Money Transmission Statute
The Texas Department of Banking recently issued a Supervisory Memorandum clarifying how its money transmission statute applies to stablecoins backed by sovereign currency. The Department reiterated—consistent with its 2014 guidance—that Texas’s money transmission statute only regulates “money” or “monetary value” and that most virtual currencies fall outside the statute’s scope. But the Department stated that stablecoins backed by sovereign currency, such as Tether, qualify as “money” or “monetary value.” Under Texas’s statute, money or monetary value includes either sovereign-issued currencies or claims that can be converted into such currencies. The Department concluded that, unlike most virtual currencies, stablecoins backed by sovereign currency are money or monetary value because they represent claims that can be redeemed for currency. The Department explained that, as a result, entities doing business in Texas that hold stablecoins backed by sovereign currency for third parties—such as custodial wallet providers or intermediated exchanges—will most likely need a Texas money transmission license.