Bitcoin regulations. We have ‘em.
Texas will not treat Bitcoin and other virtual currencies as legal money, according to a new memo from the Texas Department of Banking. Yet some companies that deal in Bitcoin transactions could draw state oversight, even if they are based outside of Texas.
Texas Banking Commissioner Charles Cooper issued a memo this month outlining the agency’s policies involving virtual currencies like Bitcoin.
“At this point a cryptocurrency like Bitcoin is best viewed like a speculative investment, not as money,” Cooper said in a statement.
In his memo, Cooper provided reasoning that echoed the IRS. Last month, the federal agency announced that, for tax purposes, it would treat Bitcoin as property instead of currency because no government recognizes the virtual currency as legal tender.
“Because neither centralized virtual currencies nor cryptocurrencies are coin and paper money issued by the government of a country, they cannot be considered currencies under the statute,” Cooper’s memo reads.
While Texas does not have a state income tax, the state’s Department of Banking does regulate certain financial transactions and license financial institutions. An exchange of Bitcoin for U.S. dollars between two parties would not draw the agency’s interest, according to the memo.
But some third-party Bitcoin exchanges are already drawing state scrutiny because of the way they handle transactions involving U.S. currency and Bitcoin, according to Daniel Wood, assistant general counsel at the Department of Banking. Cooper’s memo states that such exchanges are involved in “money transmission” because they act as an “escrow-like intermediary” that holds onto a buyer’s funds “until it determines that the terms of the sale have been satisfied before remitting the funds to the seller.”
Such exchanges do not need to be based in Texas to fall under the state’s regulations, Wood said. “If they do business with Texas consumers, we can force them to get a Texas license,” he added.
I’ll admit, I had no idea there was a Texas Department of Banking. I don’t know what effect this will have, but I suppose it’s good to be one of the pioneers in setting this sort of regulatory framework. I personally think that Bitcoin is more toy than currency, though I could see it maybe being useful for campaign contributions. Assuming all disclosure and other requirements are met, of course. What do you think about this?