Texas’ Path to GENIUS Act Compliance: What State-Chartered Banks Need to Know

Texas already regulates two pillars that matter for GENIUS Act–style stablecoin oversight:
(1) fiat-backed stablecoins under the Money Transmission Modernization Act (MTMA) umbrella and
(2) digital-asset platforms and custodians under Finance Code Chapter 160.

Below is how that framework works today, where it aligns with federal expectations, and the state bodies and processesthat would finish the job.

How Texas currently treats fiat-backed stablecoins

Texas adopted the MTMA framework and went further by expressly bringing fiat-backed stablecoins into state money-transmission law.
If you transmit or custody a fiat-backed, fully reserved, redeemable stablecoin for Texans, you’re in licensed activity.

The Texas Department of Banking (TXDOB) interprets the Finance Code’s definition of “money or monetary value” to include any stablecoin that:

• is pegged to a sovereign currency,

• is fully backed by reserve assets, and

• grants the holder the right to redeem for fiat from the issuer.

Texas Finance Code Chapter 160 — What it requires today

Enacted by HB 1666 in 2023, Chapter 160 adds consumer-protection and transparency obligations for “digital asset service providers” (DASPs) that are already licensed as money transmitters. It focuses on proof-of-reserves, segregation of customer funds, and auditability.

Key requirements:

1. No commingling — DASPs cannot mix customer funds with company funds or other property.

2. Holding structures — Customer assets must be held in segregated accounts (individual or omnibus customer-only).

3. Customer visibility — Quarterly customer access to an accounting of liabilities and assets, with auditor visibility.

4. Annual proof-of-reserves — CPA-attested reports filed with the TXDOB, verifying all customer liabilities and matching reserves.

5. Audit standards — Auditors must be U.S. CPAs using AICPA attestation standards.

6. Alternative audit path — SOX-compliant audits can satisfy certain subsections.

7. Limited operational float — Minimal provider-owned funds may be co-mingled solely to facilitate transactions, but are deemed “customer funds” by law.

8. Enforcement — TXDOB may suspend/revoke licenses, conduct exams, and impose penalties.

9. Rulemaking power — The Finance Commission of Texas can issue rules to clarify and implement Chapter 160.

Where Texas already matches the GENIUS Act

Aligned areas:

• Segregation of reserves — Mirrors GENIUS Act requirement for customer-fund separation.

• Proof-of-reserves & auditability — Annual CPA-attested reports are a solid base for moving to monthly, public attestations.

• Licensing perimeter — Clear inclusion of fiat-backed stablecoins ensures coverage.

• Supervisory authority — Strong enforcement, examination, and rulemaking structures already exist.

The big gaps to reach Treasury certification

To qualify for Treasury “substantially similar” certification under the GENIUS Act’s state-chartered pathway (and allow Texas banks to issue under the $10B cap), Texas must:

1. Move from annual to monthly, public reserve reporting with detailed asset composition.

2. Codify par-value, on-demand redemption rights for stablecoins, with standardized consumer disclosures.

3. Restrict reserve assets to high-quality, liquid instruments (cash, insured deposits, short-term Treasuries).

4. Define who may issue payment stablecoins under state law and limit permissible activities to the stablecoin business line plus closely related services.

5. Establish customer priority in insolvency for all reserve assets.

Who makes these changes in Texas?

1. Texas Legislature

• Passes or amends statutes (e.g., to codify redemption rights, reserve-asset limits, claim priority).

• HB 1666 (88th Legislature) is an example of how Chapter 160 was created in the first place.

2. Finance Commission of Texas — The Rulemakers

• Legal Authority: Chapter 160, Sec. 160.006

  “The Finance Commission may adopt rules to administer and enforce this chapter, including rules necessary and appropriate to implement and clarify this chapter.”

• Composition:

  • 11 members, all private citizens, appointed by the Governor and confirmed by the Senate.

  • Required seats:

    • 2 state bank executives

    • 1 state savings executive

    • 1 consumer credit executive

    • 1 residential mortgage loan originator

    • 6 public members (one must be a CPA)

  • Members serve staggered 6-year terms.

• Function in this context:

  • Draft and adopt technical rules — e.g., increasing reserve-reporting frequency, defining asset eligibility, standardizing disclosures.

  • Act on recommendations from TXDOB.

3. Texas Department of Banking (TXDOB)

• Day-to-day administration and enforcement of Chapter 160.

• Banking Commissioner can waive specific requirements when consistent with the law.

• Works with the Finance Commission to develop proposed rules.

Bottom line for Texas-chartered banks

Texas already has the licensing perimeter, reserve segregation, and auditability pieces in place.
What’s missing are GENIUS Act–grade redemption rights, reserve eligibility rules, and monthly public reporting.

The Legislature will set the statutory foundation.
The Finance Commission will fill in the technical rulebook.
The Department of Banking will supervise implementation.

Once those changes are made and Texas earns Treasury certification, state-chartered Texas banks could issue GENIUS-compliant stablecoins under the $10B cap — without needing an OCC charter.