Many states are touting their friendly nature toward blockchain technology and even looking for ways to increase the applications of top digital currencies such as bitcoin, including for paying taxes. But in Texas, there's been a focus on weeding out the bad actors rather than developing new bills to make it easier for blockchain and cryptocurrency businesses to operate here.
Most recently, Texas regulators have issued a cease-and-desist request to investment platform DavorCoin for its activity in the state. The Texas State Securities Board sent the letter to DavorCoin execs in early February, stating that the cryptocurrency startup was illegally selling unregistered securities to Texas residents for promising investors a fixed return to participate in their lending program.
The writing was on the wall. It was, in fact, the TSSB that set the wheels in motion for the end of a similar crypto investment platform BitConnect that was marketing its bitcoin-fueled business and guaranteeing fixed returns to locals in the state.
Now BitConnect in addition to being hit with a pair of class-action lawsuits has closed its doors. It's a message to cryptocurrency companies looking to operate in the state not to circumvent securities laws or make false claims to its residents.
Texas businesses may also be exploring whether an initial coin offering -- or ICO -- is right for them. ICOs are a way for companies to raise capital publicly in a loosely regulated market. Last year, ICOs raised more than $4 billion combined.
But Texas regulators have these deals on their radar as well, as evidenced by a similar cease-and-desist request that the TSSB issued to international ICO R2B coin, which marketed its cryptocurrency to Texas locals without registering their token as a security.
Making Sense of It All
The rise of blockchain and cryptocurrencies has merchants operating across industry verticals considering which role, if any, they should play. But for now, the state appears to be taking more of a defensive role in this market than an offensive one, which suggests businesses should be especially careful about adopting any of these emerging technologies. The Posey Law Firm to discuss whether or not blockchain and cryptocurrencies make sense for you.