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In March 2021, Tan Parker, the Majority Leader in the Texas House of Representatives, announced Bill 4,474, which, in essence, opens the “right to life” for crypto. Parker suggested amendments to the Uniform Commercial Code (UCC), designed to adapt coins and blockchain technology in commercial law. Why is this document attractive for the cryptocurrency community? Let’s take a closer look.
Prospects for crypto in Texas
The UCC (Uniform Commercial Code) is a standardized set of laws and regulations for doing business in the United States. It is valid in all states, but in each – with different amendments. Bill No. 4,474 introduces the concepts of blockchain and cryptocurrencies into the UCC. Perhaps this will allow Texas to become a leader in the development of crypto technologies in the country.
The document was compiled with the active participation of the Texas Blockchain Council. The nonprofit’s president, Lee Bratcher, argues that the legislation is similar to the Wyoming Digital Assets Act passed in early 2019, at least insofar as it attempts to legally define “virtual currency.” The introduction of amendments will allow judges to rely on clear and understandable norms of the Law in resolving disputes.
Despite the urgent need for a legislative definition of cryptocurrencies, there are some shortcomings in the text of the document. For example, the proposed bill does not define the order and procedure for the forced retention of virtual money. This is important due to the growing popularity of bitcoin as collateral for loans.
It turns out that the potential owner of bitcoins will not be able to determine before buying whether they are collateral in a previously issued loan or not. In the traditional approach (with real estate, car or other property), the buyer has the opportunity to check the rights to his future acquisition. And based on this, evaluate the commercial benefits of the purchase. And creditors can impose a ban on the sale of collateral. Draft Law No. 4,474 does not provide similar opportunities for cryptocurrencies.
At the same time, the Wyoming Digital Assets Act clearly states:
- how lenders can impose a mandatory hold on digital assets;
- how to remove a ban on sale or transfer from an asset;
- the responsibility of the buyer for the acquisition of such collateral is provided, etc.
In Texas, they decided to completely release the buyer from the financial claims of creditors, which may lead to a refusal to issue loans secured by cryptocurrencies.
Of course, the document has not yet been adopted and is not even being considered. So far, it has only been submitted for public discussion to collect recommendations for improvement, but even in this form it has received positive feedback from many Texas companies involved in the field of blockchain and digital assets. At the same time, it is reported that 3 more bills related to the field of cryptocurrencies are under development.
“Texas is the second largest economy in the United States. The state’s congressional delegation is 10 times larger than that of Wyoming, which indicates much more influence in Washington. We support Wyoming’s crypto initiatives and want to work together to implement them at the federal level.” Lee Bratcher remarked.
Pioneers of American crypto legislation
The peculiarities of the US legislative system are such that regulations in different states can define the same subject differently. What is considered a violation of the law, for example, in Delaware, will be completely legal in California (and there are also uniform federal laws for all). And the existence of a legislative definition of cryptocurrencies in Wyoming or Texas does not mean at all that lawyers from other states will be able to refer to it in their practice. At the moment, the country’s leadership in relation to the crypt is rather conservative, and therefore does not assume its legalization at the national level. To make radical progress in this direction, the efforts of just two states are clearly not enough. Only if 5-10 more territories join the legislative initiatives of Texas and Wyoming, congressmen will have to react.
The current situation, when some consider cryptocurrencies a commodity, others an asset, and others virtual money, only hinders the development of the industry and attracting investors. The definition of a single, simple and understandable position and the development of federal legislation will allow businesses to invest in improving this sector. Only then will the fears associated with the risk of misinterpretation of certain laws disappear.
In fact, attempts to legalize crypto in Texas, and earlier in Wyoming, are the first signals that business in the United States is ready to work in the field of digital finance and blockchain. And, as always, it is the one who manages to take advantageous places in this niche that will be able to count on the most tidbits of the “cryptocurrency pie” in the foreseeable future.
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