Texas crypto laws recognize digital assets as property, license the businesses that convert them to and from dollars, impose reserve and custody duties on companies holding crypto for customers, and require large mining operations to register with the state grid regulator. There is no Texas income tax on trading gains, but federal tax on every sale, swap, or payment received in crypto still applies. What follows is what a Texas resident, business owner, or miner actually needs to know.
How Texas Treats Crypto as Property
House Bill 4474 folded virtual currency into the Texas Business and Commerce Code by amending the state’s version of the UCC. Section 9.102 now defines virtual currency as a digital representation of value that functions as a medium of exchange, unit of account, or store of value, often secured using blockchain technology.1Texas Legislature Online. Texas HB 4474 – Relating to the Control of Virtual Currency and the Rights of Purchasers
The more useful concept for holders and lenders is control. Section 9.1071 says a person has control of virtual currency when the system gives them the power to receive substantially all its benefit and the exclusive ability to prevent others from doing the same or to transfer control to someone else.2Justia Law. Texas Business and Commerce Code Section 9-1071 – Control of Virtual Currency Control lets a lender perfect a security interest in crypto without even filing a financing statement, though filing remains available.3Texas Legislature Online. 87R HB 4474 – Bill Analysis
Chapter 12 of the Business and Commerce Code adds a take-free rule: a good-faith purchaser who obtains control of virtual currency for value and without notice of a competing claim takes it free of that claim.4Ave Maria School of Law. UCC Article 12 – New Protections for Crypto Creditors If you buy bitcoin through a legitimate exchange and take control, a prior owner’s creditor generally cannot claw it back from you.
When a Crypto Business Needs a Texas Money Transmitter License
Not every crypto business needs a license. The Texas Department of Banking’s Supervisory Memorandum 1037 draws the line at sovereign currency: cryptocurrency by itself is not “money” under the Texas Money Services Act, so receiving crypto and sending it somewhere else is not money transmission. The trigger is U.S. dollars or another government-issued currency in the transaction.5Texas Department of Banking. Virtual Currency Guidance
An exchange that takes dollars from a customer, converts them to bitcoin, and sends bitcoin to a third party is transmitting money. A platform that only matches buyers and sellers of crypto without ever touching fiat may not need a license, though the Department reviews each situation on its facts. Exchanging virtual currency for sovereign currency does not require a separate currency exchange license, because virtual currencies are not the “coin and paper money” of any country under the statute.
When a license is required, the numbers are serious. The application fee is $10,000, with additional investigation fees possible for complex reviews. Licensees must maintain a tangible net worth of at least the greater of $100,000 or 3 percent of total assets under $100 million.6Texas Department of Banking. General Application Requirements The Money Services Act itself sets a minimum net worth starting at $500,000, and the Banking Commissioner can raise it to $1,000,000 based on the applicant’s risk profile. Virtual currency holdings do not count toward permissible investments under the statute.
Skipping a required license is a federal crime as well as a state problem. Running an unlicensed money transmitting business carries up to five years in prison, a fine, or both, whether or not the operator knew a license was required.7Office of the Law Revision Counsel. 18 US Code 1960 – Prohibition of Unlicensed Money Transmitting Businesses
Custody Duties for Digital Asset Service Providers
House Bill 1666 created Chapter 160 of the Texas Finance Code, which imposes concrete duties on any company acting as a digital asset service provider. The core rule is reserve adequacy: a provider must hold enough assets to fulfill every obligation it owes to customers.8Texas Legislature Online. Texas Finance Code Chapter 160 – Digital Asset Service Providers If a custodian is supposed to hold 500 bitcoin for its clients, it needs 500 bitcoin (or equivalent approved investments) in reserve.
The law prohibits commingling customer funds with the company’s own money in any form, including operating capital, proprietary trading accounts, or the provider’s own digital assets. Providers cannot use customer funds to guarantee someone else’s transaction, and they cannot hold funds in a way that would prevent a customer from fully withdrawing their assets. That last point rules out locking customer holdings into illiquid investments or staking arrangements that block withdrawals.
Customers must receive at least quarterly access to an accounting of what the provider owes them and what it holds in reserve on their behalf. An independent CPA must be able to view that same information at any time. Within 90 days of each fiscal year’s end, the provider files a report with the Texas Department of Banking that includes its attestation of outstanding customer liabilities, evidence of customer assets held, the transparency plan, and an auditor’s attestation that the report is accurate. Violations can cost a provider its money transmission license, which effectively shuts it down in Texas.
One thing Chapter 160 does not create is deposit insurance. Traditional bank deposits carry FDIC coverage up to $250,000; crypto held by a service provider has no equivalent safety net, even if the custodian follows every rule in the chapter.
Rules for Texas Crypto Miners
Texas draws large-scale mining because of its deregulated energy market and cheap electricity, and the state has two rules built specifically around that industry. Senate Bill 1929 requires a mining facility to register with the Public Utility Commission of Texas when its total load is expected to exceed 75 megawatts and the load is interruptible.9Texas Legislature Online. Texas Senate Bill 1929
Registration is due within one business day of entering into a retail electric service agreement in the ERCOT region. The operator reports the facility’s location and its anticipated energy demand over the following five years. The PUC can share that data with ERCOT, letting the grid operator factor mining loads into reliability planning and coordinate voluntary curtailment during extreme demand events.10Texas Legislature Online. 88R SB 1929 – Bill Analysis Miners get cheap power in exchange for scaling back when the grid is stressed.
House Bill 591 offers a separate incentive for miners willing to co-locate with oil and gas wells. The bill exempts gas from the state severance tax when it is produced from a qualifying well, consumed on site, and would otherwise have been lawfully vented or flared.11Texas Legislature Online. Texas House Bill 591 – Exemption From the Severance Tax for Gas That Would Otherwise Have Been Vented or Flared A mobile data center can set up at a remote well site, use stranded natural gas to generate electricity, and neither the miner nor the well operator pays severance tax on that gas. The bill analysis names cryptocurrency mining as an intended beneficiary.12Texas Legislature Online. House Bill 591 Bill Analysis Qualifying wells include those not connected to a pipeline or where pipeline capacity cannot keep up with production.
Texas State Tax Treatment
Texas has no individual income tax and no corporate income tax, so residents owe the state nothing on their crypto trading profits. Business entities operating in Texas do owe the franchise tax, which applies to crypto companies the same as any other business. Franchise tax is calculated on a business’s margin rather than net income, using whichever of several methods produces the lowest amount.
Sales tax treats cryptocurrency as intangible property. Buying or selling bitcoin by itself does not trigger the state’s 6.25 percent sales tax. The taxable event is using crypto to buy a physical good or a taxable service. In that case, the merchant collects sales tax based on the fair market value of the crypto at the moment of the transaction, exactly as if the buyer had paid cash. Businesses accepting crypto need to document the exchange rate for each sale, because the Texas Comptroller can audit those records.
Federal Taxes Still Apply
Moving to Texas does not eliminate tax on crypto gains, because the federal side is untouched. The IRS treats virtual currency as property, not currency, and every sale, exchange, or disposal of a digital asset is a taxable event that must be reported, whether it produced a gain or a loss.13Internal Revenue Service. Frequently Asked Questions on Virtual Currency Transactions14Internal Revenue Service. Digital Assets
How much you owe depends on how long you held the asset:
- Held one year or less: gains are taxed as ordinary income at your regular federal rate, from 10 to 37 percent depending on total taxable income.
- Held more than one year: gains qualify for long-term capital gains rates of 0, 15, or 20 percent, again depending on income.
The holding period starts the day after you acquire the asset and ends the day you sell or exchange it. Gains and losses go on Form 8949 and are summarized on Schedule D of Form 1040.
Every federal income tax return now includes a digital asset question asking whether you received, sold, exchanged, or otherwise disposed of any digital asset during the tax year. It appears on Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, 1120-S, and 709. You can answer “No” if you only held crypto or bought it with U.S. dollars and did nothing else with it that year. Any sale, any swap of one token for another, any mining or staking income, or any airdrop triggers a “Yes” and a reporting obligation. The IRS expects records of the date, amount, fair market value, and cost basis for every transaction.
Starting in 2025, digital asset brokers, including trading platforms, payment processors, and hosted wallet providers, must issue Form 1099-DA to report your transactions to you and the IRS. The IRS now receives independent records of your activity, so underreporting is far riskier than it used to be.
Federal Registration for Crypto Businesses
A Texas crypto business can be fully compliant with state rules and still violate federal law. Any company qualifying as a money services business federally must register with FinCEN using Form 107 within 180 days of beginning operations, and renew every two years; the owner or controlling person is personally responsible for filing, and records must be kept at a U.S. location for five years.15FinCEN.gov. Money Services Business (MSB) Registration
FinCEN’s definition reaches broadly. Federal rules can treat someone who accepts and transmits convertible virtual currency as a money transmitter even without any fiat involvement, unlike the Texas guidance that excludes pure crypto-to-crypto activity from state licensing.16FinCEN.gov. Request for Administrative Ruling on the Application of FinCEN Regulations to a Virtual Currency Trading Platform
On the securities side, a March 2026 SEC interpretation clarified that most crypto assets are not themselves securities and set out categories distinguishing digital commodities, collectibles, tools, stablecoins, and digital securities.17U.S. Securities and Exchange Commission. SEC Clarifies the Application of Federal Securities Laws to Crypto Assets Tokens that fall in the digital securities category remain subject to full SEC registration and disclosure; those in the commodity or tool categories face a lighter regulatory touch. Projects that launched tokens before the guidance should revisit their classification, because the interpretation also allows an investment contract to end, meaning an asset that started as a security may not always be one.
National banks operating in Texas have separate authority from the Office of the Comptroller of the Currency to provide crypto custody, including facilitating exchange transactions, trade execution, and recordkeeping. In late 2025 the OCC confirmed that national banks can hold small amounts of crypto on their balance sheets to pay blockchain network fees related to permissible custody activities.18Office of the Comptroller of the Currency. Interpretive Letter 1186 A federally chartered bank offering crypto custody in Texas operates under OCC supervision on top of any state requirements.