Texas Considers Recognizing Stablecoins as Transactional Currency
Stablecoins have been big news and in the back of crypto investors’ minds ever since Jeremy Allaire – Circle CEO – predicted that eventually all fiat currencies will have a Stablecoin version. Since then, a raft of fiat currencies have been tokenized and put on blockchains, and Texas is starting to flirt with the idea of letting people pay with these stablecoins. If Texas does go ahead and label stablecoins as legal tender in the state, we could see a huge wave of investors rushing into the stablecoin space.
A New Asset Class
January was less than 48 hours old when a supervisory memorandum – number 1037 – stated that “cryptocurrency is not money under the Money Services Act,” and, “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.” This could imply that Texas is considering creating an entirely new asset class just for stablecoins. due to the fact they are not a cryptocurrency and – at the same time – not a fiat currency.
What’s the Difference Between Stablecoins and Banked Funds?
This question is most likely on everyone’s lips right now, and truth be told there isn’t actually much difference. The one main difference between the two is that a stablecoin is registered to you – until you sell or swap it – on a public blockchain, whereas fiat cash in the bank is kept on your bank’s internal ledgers. They are two very similar products and are essentially digital IOUs from the bank saying that the bank promises to pay the bearer “x” value of currency. This means that we are likely to see stablecoins as an accepted form of currency within the year – scary, huh?
Demand for Custodial Solutions Ramps Up
As more stablecoins enter the market – and regulations for crypto exchanges ramp up – there is an ever-increasing demand for stablecoin custody solutions. A stablecoin custody solution is essentially a third-party cold wallet that looks after a crypto exchange’s stablecoins so it doesn’t have to. To this extent, BitGo – one of the most popular crypto custodial solutions – has increased its offering and has started accepting stablecoins. In fact, the demand for stablecoin custody is so high, that BitGo has even added support for Universal Alliance Protocol stablecoins.
Countries all around the globe are jumping aboard the stablecoin movement and Texas could be the signal flare that ignites nations to follow suit and start allowing payments in stablecoins. It would allow people to quickly transfer their crypto – far faster than cashing out back to the bank – being the first, but crucial step towards mass adoption of cryptocurrencies as a payment method.