The Texas Department of Banking has announced that state-chartered banks may offer cryptocurrency custody services. “The Texas Department of Banking believes that the authority to provide these services in relation to virtual currencies already exists,” the banking authority said.
Texas State-Chartered Banks Officially Authorized to Offer Crypto Custody Services
Texas Department of Banking released notice Telling the banking industry on Thursday:
Texas state-chartered banks may provide virtual currency custody services to customers, as long as the bank has adequate protocols in place to effectively manage risks and comply with applicable law.
“While the custody and safekeeping of virtual currencies will necessarily differ from those associated with more traditional assets, the Texas Department of Banking believes that the authority to provide these services in relation to virtual currencies already exists in Texas. Finance Code 001 32.001,” the notice clarifies.
The banking authority explained that each bank will choose crypto custody services based on its expertise, risk appetite and business model.
For example, banks may allow customers to maintain direct control over their own cryptocurrencies and only store copies of their private keys attached to the coins. Alternatively, the bank may exercise control over the customers’ cryptocurrency, allowing new private keys to be created on behalf of the customers.
The Texas banking regulator has previously determined that custodial services may be provided by a Texas state-chartered bank in a fiduciary or non-judicial capacity. If a bank provides custody services in a fiduciary capacity, it will have the right to manage customers’ cryptocurrency as it would any other type of asset in such capacity.
Before a bank can offer cryptocurrency services, management must “execute due diligence and carefully examine the risks involved in offering a new product or service through a systematic risk assessment process,” the regulator continued. If management and the board of directors decide to proceed with crypto services, “effective risk management systems and controls should be put in place to measure, monitor and control the relevant risks associated with the custody of digital assets.”
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