In a move which provides a tad more clarity on the status of cryptocurrencies in Texas, the Money Services Act identifies virtual-to-fiat as a “money transmission” while crypto-to-crypto transactions shall be considered as a transaction which carries no monetary value. The rationale for such categorization is their being “centralized virtual currencies” or “decentralized virtual currencies.”
The enactment of the new law sets to clarify in simple terms what constitutes a taxable transaction and what shall remain merely a transfer of ‘value’ without any financial value assigned to it. For some months now, governments across the world are in the midst of varies stages of investigating policy-making with regard to the use of virtual currencies. The biggest challenge for these lawmakers has been the non-classifiable quality of cryptocurrencies- are the property, are cryptos securities or are cryptos alternate currency system? Each of the departments follows their own rules specific to their category, like SEC considering it as securities and provisioning for appropriate tax systems.
Texas Money Services Act
The new set of laws issued under the above mentioned Act provides a finger-post for other states in the country to approach and regulate the use of cryptocurrencies in the country.
The categorization approach by the Banking system in Texas has taken the concept of the virtual currency being a ‘centralized’ or ‘decentralized.’ Specifically, the law determines that decentralized currencies are those which are either created placed for issue by an organization or a person, without a central repository or an administrator.
On the other hand is defines centralized virtual currencies as those which were created by a specific source and was issued by the specific source. These rely on an entity and hold some type of authority as well as control in terms of currency in use.
The Act also defines new entrants in cryptocurrencies-stablecoins- as a division within the centralized virtual currency system. A rider to the money regulation Act for stablecoins is that when the currency is pegged to sovereign currency then redemption right exists in terms of Stablecoin holder redeeming coin for fiat currency.
Money Act clarifies on use of cryptos in Texas
The new Act, therefore, sets to offer marginal clarity on the manner of a definition of a transaction executed using cryptocurrencies. The rationale for such classification is that cryptocurrencies are considered as a new asset class that has no currency or commodity and does not possess features which have all or neither characteristic.