Everything is bigger in Texas, which is why it should come as no surprise that the Lone Star State is taking steps to become the next Bitcoin (BTC) hotspot in America.
Recently, Texas implemented two laws to ensure that cryptocurrencies are recognized under state commercial law. Texas House Bills 4474 and 1576 went into effect on September 1, having been signed into law by Governor Greg Abbott last June. While HB 1576 has established a blockchain working group in Texas, HB 4474 provides a complete framework for demonstrating that virtual currency has a place under Texas law.
Specifically, HB 4474 adopted the proposed language for the new Uniform Commercial Code of the Uniform Law Commission, or UCC. UCC Section 12 is due to be completed next year, but states are free to adopt the proposed language in the meantime, as evidenced by HB 4474 of Texas. Patrick Butt, associate at Hunton Andrews Kurth, told Cointelegraph that the text of HB 4474 succinctly refers to three specific things:
“It defines virtual currency, while also determining how to demonstrate control over virtual currency, or how to be a qualified buyer. Finally, it shows how to improve security interests, which is incredibly useful for doing business with virtual currencies.”
To put the importance of HB 4474 into perspective, Joseph Kelly, CEO of Unchained Capital — an Austin-based Bitcoin financial services company — told Cointelegraph that as a result of Texas crypto laws, Unchained and its clients now have greater legal certainty surrounding activities such as Buying or accepting Bitcoin as collateral for loans.
Prior to HB 4474, Kelly stated that Bitcoin was new and very different, noting that previous laws were not well suited for doing business with Bitcoin. In contrast, Kelly explained that unclear definitions or uncertain judicial processes for bitcoin create unnecessary risks for all parties: “Countries that don’t move quickly to provide the kind of clarity like HB 4474 leave consumers and businesses at risk of disputes and possibly losing money.”
Although this illustrates the state of the digital asset commercial law, it is important to note that Texas was not the first state to pass such legislation. Caitlin Long, a Wyoming crypto supporter, previously told Cointelegraph that Texas has become the fourth US state to define virtual currency, trailing Wyoming, Rhode Island and Nebraska.
From legislation to constitutional amendment
While Texas appears to be following in the footsteps of other innovative states, members of the Texas Blockchain Council — an industry association that advocates for public policy initiatives focused on blockchain — have shared that larger plans are underway.
Lee Bratcher, chair of the Texas Blockchain Council, told Cointelegraph that there are discussions to incorporate Bitcoin into the Texas constitution, possibly as a constitutional amendment. According to Bratcher, the Texas Constitution has been amended more than 500 times. As such, he indicated that a Texas amendment related to the use of cryptocurrency for the property tax payment function is feasible. Bratcher noted:
“There is an idea for a constitutional amendment in Texas to allow property tax to be paid in bitcoin. This would put bitcoin on a par with gold in the Texas Comptroller’s Office and the Treasury.”
While incorporating Bitcoin into the Texas constitution may be a first for crypto-friendly states, Bratcher stated that such a proposal would not appear on state ballots until 2023: “This proposal will likely take years.” Meanwhile, Bratcher stated that the Texas Blockchain Board is working closely with Texas House Representative Giovanni Capriglioni on this project.
It is also important to note that other states such as Florida and Tennessee have recently been exploring ways to accept BTC for property tax payments. Jackson, Tennessee Mayor Scott Conger announced in July of this year that the city’s blockchain task force was studying ways to allow property taxes to be paid in bitcoin. The news came shortly after Miami Mayor Francis Suarez announced that city employees would be paid in BTC, while also allowing residents to pay fees in Bitcoin.
By implementing the Bitcoin Amendment to the Texas Constitution, Texas aims to bypass purely legislation. Peter Vogel, an attorney at Foley & Lardner LLP, told Cointelegraph that the constitutional amendments require a vote of citizens in Texas, which would be a larger legal standard than crypto laws enacted from the Texas legislature and signed by the governor.
Challenges to consider
Although Texas is taking unique measures to become one of the most crypto-friendly states in the United States, there are still challenges that may hinder the advancement of legislation.
For example, Bratcher notes that the biggest obstacle to the continued growth of cryptocurrencies in Texas is Washington, D.C. According to him, the lack of clarity around cryptocurrency from federal regulators has led a number of Texas-based entrepreneurs to move to a crypto-friendly environment. Countries like Switzerland and Liechtenstein: “We don’t have control over the biggest issues we see at the federal level.”
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This idea may have been brought to light recently with the US Securities and Exchange Commission threatening to sue Coinbase over its cryptocurrency earnings program. With this in mind, Bratcher noted that while there is a positive crypto ecosystem in Texas, the Texas Blockchain Board is still trying to leave room with the state Securities Board. According to Bratcher, the Texas State Securities Board has been strict about interest-earning accounts.
Additionally, Vogel commented that although Texas has passed and enacted crypto-friendly legislation, it is important to see how these laws will be challenged in both Texas and federal courts:
Until lawsuits are brought to present these laws to judges, it remains difficult to know how judges will rule to interpret the constitutional amendment or laws passed. However, if voters in Texas enact a constitutional amendment that would be a milestone in how cryptocurrency is viewed from a larger social perspective.”
