Blockchain Legal Resource

Mark Alexander Hopkins, known as “Doctor Bitcoin,” pled guilty in the Northern District of Texas on June 29, 2021, to illegally operating a cash-to-cryptocurrency conversion business. According to a press release from the Department of Justice (DOJ), Hopkins pled guilty to one count of operation of an unlicensed money transmitter business.

On June 10, 2021, the Texas Department of Banking issued an industry notice addressing the authority of Texas state-chartered banks to provide virtual currency services to customers. This is a notable development as Texas has the most state-chartered banks of any state in the country.

Texas is seeing considerable momentum with respect to a proposed digital asset law that is being considered in the 2021 legislative session in the form of House Bill 4474 (the “Virtual Currency Bill”). As the second largest economy in the United States, and the ninth largest economy in the world by GDP, the legislation could have one of the biggest impacts on digital asset industry since the New York BitLicense was introduced. In short, the Texas Virtual Currency Bill provides a basic legal framework for companies dealing with virtual currencies.

In the fall of 2018 we posted a state-by-state summary of smart contract legislation which included an overview of legislation passed in Arizona, Tennessee and Vermont, as well as an update on legislation pending in other states at the time. Over the past few years, a multitude of states have tackled smart contract legislation with varying degrees of detail and success. Most state smart contract legislation has fallen into three broad categories: formation of exploratory committees, recognition of basic smart contract concepts and comprehensive treatment of smart contracts and related technologies.

On January 30, 2019, a Florida appellate court reversed the trial court’s dismissal of State v. Espinoza, instead holding that a Bitcoin business was both a money transmitter and a payment instrument seller, subject to Florida’s statutes governing money services businesses. The decision contrasts with recent guidance in Texas and Pennsylvania regarding cryptocurrencies, where virtual currencies in those states were not deemed money under applicable state statutes and businesses that conduct transactions exchanging virtual and sovereign currencies do not generally require a currency exchange license.

Not only do operators of virtual currency businesses face a growing body of overlapping federal regulations, but they must also contend with a patchwork of state laws as well. Compliance with state money transmitter laws, which typically provide for licensure and supervision of various non-bank financial services companies that handle cash on behalf of consumers, has become a hot-button issue for members of the crypto community. 

On July 11, 2018, in an emergency cease and desist order, the Texas securities commissioner took action against several individuals and affiliated companies based in Utah to halt the offering of unregistered cryptocurrency mining investments to Texas residents. The order alleges numerous violations of the registration and antifraud provisions of the Texas Securities Act.