The Texas banking regulator has announced that state-licensed banks can now provide custody services for clients. These custody services include the storage of crypto assets of its clients.
The services can only be offered by state-chartered banks that have established adequate protocol.
In the notice, the state banking regulator revealed that interested banks would be able to store a copy of client’s private keys. Also, taking custody of a client’s crypto asset may involve having that asset transferred into a crypto wallet that is under the control of the bank.
Having control over the crypto assets of a client may not be in line with the ethos of cryptocurrency, it does provide a springboard to improve on institutional adoption of cryptocurrency. That’s because under the U.S. legal requirement, institutional investors are to store their assets with banks, or any qualified third-party custodian.
Banks that undertake crypto custody services have to put the right protocols in place in order to adequately manage risks. The banking regulator made this known while citing that interested banks need to understand the differences between traditional assets and crypto assets. The banks are expected to have policies and security options such as cold storage, multi-signature wallets and insurance coverage to protect crypto assets under their custody.
The state banking regulator made it clear that the banks are to have risk management systems to control, measure and monitor crypto assets.
Texas has become crypto-friendly after passing the House Bill 4474 in May, which amended the state’s Uniform Commercial Code to include “virtual currency.”