Bitcoin and other cryptocurrencies always seem to be big news. These types of currencies are still in their infancy. Their rise in popularity notwithdtanding, it’s a good idea to know how the state of Texas and the federal government protect and regulate them.
Some people have a lot of money invested in cryptocurrencies. If you’re one of those, then it’s important to read on to find out more about how and if your investments are protected, including how friendly the state of Texas is toward bitcoin and other types of virtual currency.
How Crypto Is Regulated in Texas
Texas, just like the federal government, does not recognize cryptocurrencies like Bitcoin as legal money. However, they do recognize them as is a taxable commodity that can be used on a transactional basis.
Fact of the matter is that there’s not a lot of guidance from the state or the federal government when it comes to virtual currency. Most guidance revolves around cryptocurrency businesses and how they are licensed.
In Texas, selling cryptocurrency does not require a money transmitter’s license. Thus, companies based in the state are not required to carry a money transmitter’s license if they are doing an exchange for customers in the state.
Federal Regulations
The Internal Revenue Service has offered some more guidance in this area. Notably, they’ve stated that the federal government does not consider cryptocurrencies like Bitcoin to be legal tender.
The agency, however, does consider them to be taxable income when they are provided for services rendered. They must be reported on 1099 forms and subject to self-employment tax. Plus, capital gains taxes apply as they would for a mutual fund, stocks, and bonds.
The Texas Virtual Currency Bill
The Texas Virtual Currency Bill was signed into law in 2021. It worked to establish a few things about crypto in the state of Texas, including:
Providing a Legal Definition
Texas now has on its law books a definition for cryptocurrency or virtual currency as the law states. Texas considers virtual currency to be a digital representation of value used as a way to exchange, store, or value – but it is not legal tender.
Rights to Cryptocurrency Investors
If you buy cryptocurrency, then the state law in Texas now says that you have rights to the extent of the
interest that is purchased in cryptocurrency. So, if you buy one-third of a single Bitcoin, then you have
rights to that one-third.
Buyer Beware
If you are dipping your toe into the world of cryptocurrency in Texas, then there are some important things to be aware of. You and your business can deal with transactions involving crypto, but it’s not protected as a type of sovereign currency. You should scrutinize any crypto as well as the way it is being transferred to you before making any sort of agreement.
There are a lot of unanswered questions about the legal status and ramifications of using different cryptocurrencies in Texas. If you have specific questions, it’s a good idea to reach out to an experienced attorney to help advise you in these matters. An attorney who has experience in computer law and white collar law is the perfect person to help you move forward in the future, for crypto and beyond.
