The Department of Banking and Bitcoin: The Memo That Said It Wasn't Money

What is the Department, and what does it regulate?

Banks, trust companies, and the businesses that move other people's money – not securities, and not, by its own definition, bitcoin. The Department of Banking dates to 1905, reports to the eleven-member Finance Commission the governor appoints, funds itself from the institutions it supervises at no cost to general revenue, and was last continued by the Sunset process to 2031.^[30][37] It charters and examines 196 state banks holding $350 billion, forty trust companies, and 197 money-services businesses moving $440 billion a year through Texas – among them Coinbase, at $15.2 billion, Block, and Kraken – with about two hundred staff under a commissioner, Charles Cooper, whom the Finance Commission appointed on December 1, 2008 and who has signed every crypto order the agency has entered.^[30][32][36] Its statute for this page is the Money Services Act of 2005, Finance Code Chapter 151, replaced on September 1, 2023 by the Money Services Modernization Act, Chapter 152, which the Department helped write as the model law of the Conference of State Bank Supervisors, and since 2023 the digital-asset custody chapter, Chapter 160.^[11][10][12] The regulator next door that polices the people selling crypto investments is on the Texas State Securities Board and Bitcoin; the lawyer who files the Department's objections in bankruptcy court is on the Texas Attorney General and Bitcoin. This page is the agency that decided, first, what the asset was not.

What did Memo 1037 say in 2014?

That the question of licensing turns on dollars, and bitcoin is not one. Supervisory Memorandum 1037, addressed on April 3, 2014 to “All Virtual Currency Companies Operating or Desiring to Operate in Texas,” walked through the Money Services Act's two definitions and found the asset outside both. Not currency, “because neither centralized virtual currencies nor cryptocurrencies are coin and paper money issued by the government of a country.” Not money: “A unit of cryptocurrency is also not a claim. It does not entitle its owner to anything, and creates no duties or obligations in a person who gives, sells, or transfers it. There is no entity that must honor the value of a cryptocurrency … Therefore cryptocurrencies as currently implemented cannot be considered money or monetary value under the Money Services Act.”^[1] From that, five cases. A sale of cryptocurrency for dollars between two parties “is essentially a sale of goods.” Crypto for crypto: “Regardless of how many parties are involved, there is no receipt of money.” Transfer and custody of the coin alone: not transmission, “including intermediaries who receive cryptocurrency for transfer to a third party, and entities who, akin to depositories, hold cryptocurrency on behalf of customers.” An exchange that escrows dollars, “such as the failed Mt. Gox,” “is generally money transmission.” And a machine: “usually but not always” – because “at least some Bitcoin ATMs can be configured to conduct transactions only between the customer and the machine's operator, with no third parties involved. If the machine never involves a third party … there is no money transmission.”^[1] Cooper's release called bitcoin “best viewed like a speculative investment, not as money.”^[2] The Department's Daniel Wood told the Tribune it was “the first memorandum to offer specific guidance on how Bitcoin and cryptocurrency fit into the current regulatory scheme from a state,” written with “some motivation to get out there quickly and help guide the national discussion” – New York having opened BitLicense applications on March 11.^[3][4] Cooper, to the Legislature in 2022: “Texas was the first state to publish such guidance and the Memorandum served as a template for guidance published in other states.”^[9] The merchants and the machines the memo arrived after are on the grassroots era; what the memo means for a Texan today is on what Texas law actually says about Bitcoin.

How did the memo change?

Twice, and never on bitcoin. In January 2019, to meet “the widespread introduction of stablecoins to the market,” the Department added a category: a stablecoin pegged to a sovereign currency, backed by a reserve, and redeemable “may be considered a claim that can be converted into currency and thus fall within the definition of money or monetary value,” and receiving one for transmission “may be money transmission … regardless whether the redemption right is expressly granted or implied by the issuer.” It named Tether.^[5]CoinDesk called Texas, the same week, “one of the nation's most permissive” jurisdictions – and now the one where a stablecoin issuer needed a license.^[6] The Legislature wrote that reading into the Money Services Modernization Act in 2023: money or monetary value “includes stablecoin” that is pegged, fully backed, and redeemable.^[11] On January 28, 2025 the memo was rewritten for the new chapter. The five-activity list – the safe harbors of 2014, including the paragraph on machines – was removed in favor of “case-by-case” analysis; the statutory definition was adopted; and a new sentence closed a door Tether had walked through: an issuer that “does not in fact hold sufficient sovereign currency in reserve” “does not remove that stablecoin from the regulatory ambit.” The first row did not move: “non-stablecoin virtual currency is not money or monetary value under the MSMA.”^[7] The statute that gave the asset a definition the Department's never did – HB 4474, the Uniform Commercial Code chapter – is on Tan Parker and Bitcoin.

What is Industry Notice 2021-03?

The Department's one affirmative act for the asset. On June 10, 2021 – five days before Abbott signed HB 4474, and in the same week the national bank regulators were pulling back the custody permissions of the year before – the Department issued a notice that “affirms that Texas state-chartered banks may provide customers with virtual currency custody services, so long as the bank has adequate protocols in place to effectively manage the risks and comply with applicable law.” It found no new law was needed: the authority “already exists pursuant to Texas Finance Code § 32.001.” A bank may “merely store copies of the customer's private keys” or “cause the customer to transfer their virtual currency directly to the control of the bank, creating new private keys that are then held by the bank on behalf of the customer,” as a fiduciary with trust powers or, without them, as a bailee; it must have administrative, technical, and physical controls, confirm its insurance, and oversee any vendor.^[8] The Department told the Legislature in 2022 that the notice applied to trust companies too and that it “fielded a significant number of inquiries from the industry.”^[9] It has never named a bank that took the offer, and none has been publicly identified. What the custody notice does for the lender who wants to perfect against the asset is on the Texas Bitcoin law timeline.

What has the Department enforced?

The second row of the memo, thirteen times. Every crypto order the Department has entered rests on the same theory – someone received dollars, or since 2019 a stablecoin, for transmission without a license – and none on bitcoin. Bitstamp paid $120,708 in November 2020 for fiat stored value.^[26] Coin Cloud, a kiosk operator, paid $5,925 in October 2021 for exchanging stablecoin for cash at its machines.^[13] In the autumn of 2022, with the Securities Board and through the Attorney General, the Department objected in the Celsius bankruptcy to the sale of stablecoins on “troublingly broad permission” – overruled in January – and to Voyager's disclosure statement; on November 18 it entered an emergency order against FTX US for unlicensed money transmission, converted on December 1 into a consent order requiring FTX to “refuse transfers of money, stablecoin, or other monetary value from any customers located in Texas” and to post the order on its claims site, and on December 20 gave Voyager the same, neither with a penalty.^{[27][28][14][15]} Nexo paid $212,264 in March 2023; the Department and the Securities Board told the Voyager court that month that Binance.US had “abandoned its Texas license application after failing to provide sufficient financial documentation.”^[16][29] CoinFlip, another kiosk operator, paid $31,600 in July 2023 for stablecoin at its machines, and $40,840 in February 2026 for a stablecoin order desk, its license application of May 2024 still pending.^[17][24] Kraken paid $250,000 in October 2024, kept a $48 million capital injection in place, and kept operating while its application was reviewed.^[18] In 2025: $1,647,396 as Texas's share of Block's $79 million multistate anti-money-laundering settlement over Cash App, the largest sum on the ledger and not a crypto case; the Abra settlement, in which Texas sat on the working group of a 25-state agreement that returned up to $82 million in customer assets and forwent each state's $250,000 penalty, Abra having never been licensed in Texas after a 2020 no-action letter; River Financial, a Bitcoin brokerage that had applied on its own after Chapter 160, $56,545 for holding customers' dollars while it bought their bitcoin; Crypto.com, $87,109.^{[19][21][20][22][23]} And on September 11, 2026, OKX: six years of receiving “sovereign currency and stablecoin for transmission” that the company “asserts … was inadvertent,” $95,000, application pending.^[25]Chapter 160's attested custody reports have produced no enforcement and no published count. The lenders whose collapses the orders followed are on the Texas State Securities Board and Bitcoin; the representative who wrote the commingling ban is on Giovanni Capriglione and Bitcoin.

What about the kiosks?

They are the memo's first row, standing on a sidewalk. A kiosk that sells bitcoin for cash to one customer, with no stablecoin and no exchange in the middle, is a two-party sale of goods under the 2014 reading, and Cooper told the Senate on June 24, 2026 that it still is: “The Department does not regulate two party transactions involving the exchange of fiat currency for non-stablecoin virtual currency. As a result, unless the kiosk supports stablecoin and/or involves a third party … the transaction between the kiosk operator and customer is not subject to Chapter 152.”^[30] Two bills in 2025 would have changed that. SB 1705, Tan Parker's, would have registered every kiosk with the Department under a new Chapter 161 – quarterly reports, blockchain analytics, $5,000 a violation – and passed the Senate May 15, cleared the House committee 8–0 on May 22, was placed on the calendar May 27, and died at sine die; the House companion passed the House and died in the Senate. No Department testimony on either has been located. Cooper: “While neither bill was ultimately enacted, the Department was prepared to supervise and regulate the activity as required. If a similar bill is filed in the upcoming session, the Department will be prepared.”^[35][30]The cost of the year between: $56.8 million lost by Texans to kiosk scams in 2025 across 1,179 complaints — the largest adjusted-loss total of any state, not the most complaints — on some 4,000 machines, seven in ten users over sixty – “Texas regulators currently have no oversight over the kiosks,” the Tribune wrote, and AARP's Andrea Earl: “The state of Texas is behind other states on this, and then really lost momentum last session.”^[34] The FBI table, which splits the complaint count from the dollars, is on the kiosk ledger. Deputy Commissioner Saucillo, to a House committee on July 30, on why the money does not come back: “typically, they're sending it to an unhosted wallet … it gets into a mixer, it gets into all these other things, and it's very hard to get any of that back.”^[33]The senator whose kiosk bill died is on Tan Parker and Bitcoin; the bill itself is on the bills that died.

The honest counterweight: the constancy, the ledger, and the framework

Three things, and the first is the page's thesis turned over. The memo's constancy on bitcoin is the reason Texas became what it became – no special license, no BitLicense exodus, the exchanges and the miners and eventually the state itself holding an asset no regulator called money – and it is also the reason the Department cannot reach the fraud that costs Texans most. Both are the same sentence. The Department did not choose the second consequence, but it has chosen, three times, not to revise the sentence, and it did not ask the Legislature for the kiosk bill; it was “prepared.”^[1][7][30] Second, the ledger. Against $440 billion in licensed volume, the Department's crypto penalties sum to well under a million dollars once Block's anti-money-laundering share is set aside – Kraken's $250,000 for years of activity, OKX's $95,000 for six, the kiosk operators' tens of thousands – and most orders let the respondent keep operating while the application it should have filed years earlier is reviewed; its one contested position in court, the Celsius stablecoin objection, was overruled.^{[32][18][25][28]} What the ledger does show is a regulator that returns money when it can – Abra's customers got their assets and the Department waived its fine to make it so – and that has never once been found wrong on what the statute covers.^[21] Third, the framework. The Department told the Senate in June that under the federal GENIUS Act “Texas does not currently have a substantially similar framework in place” to keep regulating stablecoin issuers itself, and that it “looks forward to working with the Legislature” – the second time in two sessions it has been ready to enforce a regime it has not asked for.^[30][31] Against all of it: the Department wrote the first state guidance in the country, it has never lost a licensing case, and the industry it regulates has called its rules appropriate and its state permissive in the same breath.^[9][6]

The fair reading is that the Department of Banking decided in 2014 what bitcoin was not and has spent twelve years regulating everything around it – the dollars, the stablecoins, the banks that hold keys, the exchanges that hold cash – with a precision that made Texas the easiest state in the country to build a crypto business in and one of the hardest to police a kiosk in. The memo is the seam of Texas Bitcoin law. The Department cut it, and has kept it exactly where it was.

Where does the Department stand today?

As of September 2026: the memo in its third text, the custody notice unused by any named bank, thirteen orders, a commissioner in his eighteenth year, a kiosk bill it will be “prepared” for again in January, and a stablecoin framework it has told the Legislature Texas does not have.^[7][36][30] The 90th Legislature convenes January 12, 2027 with both on its desk and the registry-keeping regulator across the hall on the Public Utility Commission and Bitcoin. The cornerstone this page is the first stone of is the history of Bitcoin in Texas; the statute-by-statute record that begins with the memo is on the Texas Bitcoin law timeline. This page is the sentence that said it wasn't money, and everything that followed from it.