On April 3, the Texas Department of Banking released a supervisory memorandum on the regulatory treatment of virtual currencies such as bitcoin under the Texas Money Services Act. The guidance clarified that virtual currency was distinguishable from sovereign currency and did not fall under the regulatory definition of “money or monetary value” under the Money Services Act. As such, money transmission licenses generally are not required for most bitcoin and other virtual currency users because virtual currency transactions do not, from a regulatory perspective, involve the transmission of money. The guidance clarified that certain virtual currency exchange-related activity would be regulated under the Money Services Act due to the payment of sovereign currency in exchange for virtual currency. Specifically, the memorandum cited a centralized virtual currency exchange as requiring money transmission licenses if transactions on such exchange involved (a) an escrow-like third-party intermediary between buyers and sellers of virtual currencies and (b) the exchange of sovereign currency for virtual currency. The guidance also clarified that “bitcoin ATMs” (and their operators) would require money transmission licenses if such ATMs fulfilled orders through a linked virtual currency exchange (rather than through a direct point-of-sale transaction between the user and the owner of the ATM). The supervisory memorandum also provided guidance on capital requirements for applicable money transmission licenses.
The Texas Department of Banking guidance is available here.