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Texas Lawmaker Proposes Ban On Anonymous Crypto Transactions

News, Regulation | March 12, 2019 By:

Phil Stephenson, a Republican member of the Texas House of Representatives, has introduced a bill that would ban the anonymous use of cryptocurrencies in the state.

House Bill (H.B.) No. 4371, which will come into effect in September this year if it becomes law, proposes that all Texans are to verify their identities if they wish to use cryptocurrencies. However, the bill clarifies that state residents are “not required to verify the identity of a person sending payment if the payment is sent by a verified identity digital currency.”

“[Texas] may not use a digital currency that is not a verified identity digital currency — The Texas Department of Banking, Credit Union Commission, Texas Department of Public Safety, and State Securities Board shall collaborate to encourage the use of verified identity digital currencies,” the bill said.

According to the bill, the agencies mentioned will provide tools for people to distinguish a verified identity digital currency from digital currencies that allow users to remain anonymous, educate law enforcement agencies on digital currencies, and promote the use of verified identity digital currencies.

The bill has been criticized by cryptocurrency advocates, with some of them stating that the bill is scary. In a Twitter post, Andrew Hinkes, co-founder and general counsel of Athena Blockchain, said that Texas is the first state to formally attack and attempt to ban anonymous use of cryptocurrency in the US.

“Texas HB 4371 would require prior verification of identity for any transaction paid for via digital currency, only allow the state to operate with a verified identity digital currency, defined as one where identity if sender is known prior to transaction,” Hinkes said. “To my knowledge this is the first bill of it’s kind.”

Hinkes also raised a few critical questions: “Would any existing cryptocurrency or digital currency qualify as a ‘verified identity digital currency’ as defined? What level of ‘ID’ is required to be ‘verified’? State issued? Are four state administrative bodies the right entities to ‘promote’ a digital currency?”