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The Texas Department of Banking issued a notice to the banking industry on Thursday announcing that state-chartered banks can provide cryptocurrency custody services. The notice stated:
“Texas state-chartered banks may provide customers with virtual currency custody services, so long as the bank has adequate protocols in place to effectively manage the risks and comply with applicable law.”
The note further reads:
“While custody and safekeeping of virtual currencies will necessarily differ from that associated with more traditional assets, the Texas Department of Banking believes that the authority to provide these services with respect to virtual currencies already exists pursuant to Texas Finance Code § 32.001.”
As disclosed by the Texas banking authority, each bank can choose what kind of crypto custody services it wants to offer based on its own expertise, risk appetite, and business model.
A bank could, for example, allow customers to retain direct control over their own cryptocurrencies and only store copies of their private keys. Or the bank can take full control of customers’ cryptocurrencies, creating new private keys that it will hold on behalf of customers.
The Texas Department of Banking previously decided that custody services may be provided by a Texas state-chartered bank in either a fiduciary or non-fiduciary capacity. A bank that offers custody services in a fiduciary capacity, would have the authority to manage customers’ cryptocurrencies in the same capacity as any other type of asset held.
Prior to offering cryptocurrency services, banks are obliged to “conduct due diligence and carefully examine the risks involved in offering a new product or service through a methodical risk assessment process,” as is outlined in the note. In addition, should the banks move forward with the crypto services, “effective risk management systems and controls must be implemented to measure, monitor, and control relevant risks associated with custody of digital assets.”
Crypto custody firm, NYDIG , recently revealed that it has developed a program to enable U.S. banks to offer Bitcoin.
According to Patrick Sells, head of bank solutions at NYDIG, hundreds of banks are already enrolled in the program. While the custodian is in talks with some of the largest U.S. banks, many of the enrolled banks are smaller institutions such as Suncrest, a California-based community bank with seven branches.
“What we’re doing is making it simple for everyday Americans and corporations to be able to buy bitcoin through their existing bank relationships,” Sells said