Texas Cryptocurrency Laws

Relevant Statute

Texas Finance Code; Money Services Act Sec. 151. 301

“Money” Definition

“Money” or “monetary value” means currency or a claim that can be converted into currency through a financial institution, electronic payments network, or other formal or informal payment system.

“Money Transmitter” Definition

“Money transmission” means the receipt of money or monetary value by any means in exchange for a promise to make the money or monetary value available at a later time or different location. The term: (A) includes: (i) selling or issuing stored value or payment instruments, including checks, money orders, and traveler’s checks; (ii) receiving money or monetary value for transmission, including by payment instrument, wire, facsimile, electronic transfer, or ACH debit; (iii) providing third-party bill paying services; or (iv) receiving currency or an instrument payable in currency to physically transport the currency or its equivalent from one location to another by motor vehicle or other means of transportation or through the use of the mail or a shipping, courier, or other delivery service; and (B) does not include the provision solely of online or telecommunication services or connection services to the Internet. 151.301

Additional Definitions

“Payment instrument” means a written or electronic equivalent of a check, draft, money order, traveler’s check, or other written or electronic instrument, service, or device for the transmission or payment of money or monetary value, sold or issued to one or more persons, regardless of whether negotiable. The term does not include an instrument, service, or device that: (A) transfers money directly from a purchaser to a creditor of the purchaser or to an agent of the creditor; (B) is redeemed by the issuer in goods or services or a cash or credit refund under circumstances not designed to evade the obligations and responsibilities imposed by this chapter; or (C) is a credit card voucher or letter of credit. “Stored value” means monetary value evidenced by an electronic record that is prefunded and for which value is reduced on each use. The term includes prepaid access as defined by 31 C.F.R. Section 1010.100(ww). The term does not include an electronic record that is: (A) loaded with points, miles, or other nonmonetary value; (B) not sold to the public but distributed as a reward or charitable donation; or (C) redeemable only for goods or services from a specified merchant or set of affiliated merchants, such as: (i) a specified retailer or retail chain; (ii) a set of affiliated companies under common ownership; (iii) a college campus; or (iv) a mass transportation system. 151.301

Exemptions

EXCLUSIONS. Subject to Subchapter J, the following persons are not required to be licensed under this chapter: (1) the United States or an instrumentality of the United States, including the United States Post Office or a contractor acting on behalf of the United States Post Office; (2) a state or an agency, political subdivision, or other instrumentality of a state; (3) a federally insured financial institution, as that term is defined by Section 201.101, that is organized under the laws of this state, another state, or the United States; (4) a foreign bank branch or agency in the United States established under the federal International Banking Act of 1978 (12 U.S.C. Section 3101 et seq.); (5) a person acting as an agent for an entity excluded under Subdivision (3) or (4), to the extent of the person’s actions in that capacity, provided that: (A) the entity is liable for satisfying the money services obligation owed to the purchaser on the person’s receipt of the purchaser’s money; and (B) the entity and person enter into a written contract that appoints the person as the entity’s agent and the person acts only within the scope of authority conferred by the contract; (6) a person that, on behalf of the United States or a department, agency, or instrumentality of the United States, or a state or county, city, or any other governmental agency or political subdivision of a state, provides electronic funds transfer services of governmental benefits for a federal, state, county, or local governmental agency; (7) a person that acts as an intermediary on behalf of and at the direction of a license holder in the process by which the license holder, after receiving money or monetary value from a purchaser, either directly or through an authorized delegate, transmits the money or monetary value to the purchaser’s designated recipient, provided that the license holder is liable for satisfying the obligation owed to the purchaser; (8) an attorney or title company that in connection with a real property transaction receives and disburses domestic currency or issues an escrow or trust fund check only on behalf of a party to the transaction; (9) a person engaged in the business of currency transportation who is both a registered motor carrier under Chapter 643, Transportation Code, and a licensed armored car company or courier company under Chapter 1702, Occupations Code, provided that the person: (A) only transports currency: (i) from a person to the same person at another location; (ii) from a person to a financial institution to be deposited in an account belonging to the same person; or (iii) to a person from a financial institution after being withdrawn from an account belonging to the same person; and (B) does not otherwise engage in the money transmission or currency exchange business or depository agent services business without a license issued under this chapter; (9-a) a trust company, as defined by Section 187.001(a), that is organized under the laws of this state; and (10) any other person, transaction, or class of persons or transactions exempted by commission rule or any other person or transaction exempted by the commissioner’s order on a finding that the licensing of the person is not necessary to achieve the purposes of this chapter. 151.003

Registration Fees

$10,000 Application Fee

Bond and Insurance Requirements

(a) An applicant for a money transmission license must provide, and a money transmission license holder must maintain at all times, security consisting of a surety bond, an irrevocable letter of credit, or a deposit instead of a bond in accordance with this section. (b) The amount of the required security is the greater of $300,000 or an amount equal to one percent of the license holder’s total yearly dollar volume of money transmission business in this state or the applicant’s projected total volume of business in this state for the first year of licensure, up to a maximum of $2 million. (b-1) The commissioner may increase the amount of security required of an applicant who intends to provide, or a license holder who is providing, third-party bill payments in conjunction with loan acceleration services, up to a total amount of $2 million, by multiplying the amount of security required under this section by a factor of up to two, if the commissioner determines, with respect to the applicant or license holder, that a higher amount of the required security is necessary to achieve the purposes of this chapter based on the factors listed under Section 151.307(b). 151.308

Bond Alternatives and Additional Insurance Requirements

(b-2) When the amount of the required security exceeds $1 million, the applicant or license holder may, in the alternative, provide security in the amount of $1 million, plus a dollar for dollar increase in the net worth of the applicant or license holder over the amount required under Section 151.307, up to a total amount of $2 million. 151.308

Capital Requirements

(a) An applicant for a money transmission license must possess, and a money transmission license holder must maintain at all times, a minimum net worth computed in accordance with generally accepted accounting principles of: (1) $100,000, if business is proposed to be or is conducted, directly or through an authorized delegate, at four or fewer locations; or (2) $500,000, if business is proposed to be or is conducted, directly or through an authorized delegate, at five or more locations or over the Internet. (b) The commissioner may increase the amount of net worth required of an applicant or license holder, up to a maximum of $1 million, if the commissioner determines, with respect to the applicant or license holder, that a higher net worth is necessary to achieve the purposes of this chapter based on: (1) the nature and volume of the projected or established business; (2) the number of locations at or through which money transmission is or will be conducted; (3) the amount, nature, quality, and liquidity of its assets; (4) the amount and nature of its liabilities; (5) the history of its operations and prospects for earning and retaining income; (6) the quality of its operations; (7) the quality of its management; (8) the nature and quality of its principals and persons in control; (9) the history of its compliance with applicable state and federal law; and (10) any other factor the commissioner considers relevant. (c) At least 50 percent of the applicant’s or license holder’s total net worth under this section must be tangible net worth. 151.307

State Comments or Statements

Language from a January, 2019 Texas Supervisory Memorandum 1037: “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. However, when a cryptocurrency transaction does include sovereign currency, it may be money transmission depending on how the sovereign currency is handled. A licensing analysis will be based on the handling of the sovereign currency.” https://www.dob.texas.gov/public/uploads/files/consumer-information/sm1037.pdf