Texas Banking Department says Chartered Banks are Allowed to Provide Virtual Currency Custody Services
“Texas leads the way,” said Texas Blockchain Council as it noted that the Texas Department of Banking has issued a notice saying that chartered banks in the state may provide customers with virtual currency custody services, as long as they have adequate protocols in place to effectively manage risks.
The notice called “Authority of Texas State-Chartered Banks to Provide Virtual Currency Custody Services to Customers” was published on June 10.
In the notice, the department said that while custody and safekeeping of cryptos will differ from more traditional assets, it believes that “the authority to provide these services with respect to virtual currencies already exists pursuant to “Texas Finance Code.”
It is up to the bank which custody services it chooses to offer based on its expertise, risk appetite, and business model. They can either store copies of the customer’s private keys or take direct control of the bank. Basically, the banks will have to determine which storage option best fits the circumstances.
In a non-fiduciary capacity, the bank acts as a bailee, taking possession of the customer’s asset for safekeeping while legal title to that asset remains with the customer, but the bank owes its customer the duty to use proper care to keep the asset safely and to return it unharmed upon request.
As for offering custody services in a fiduciary capacity, the bank has the authority to manage virtual currency assets as it would any other type of asset held in such capacity.
However, banks are required to conduct due diligence and when offering new crypto services and implement controls; of technical, physical, and administrative nature, to measure and monitor relevant risks associated with custody of digital assets.
Establishing a relationship with a service provider with expertise in handling virtual currency is also recommended as part of due diligence, as per the notice.
The banks offering crypto services are further required to have adequate coverage with their insurance carrier.