Banks in Virginia will soon have the option to provide cryptocurrency custody services, after the state’s Senate unanimously voted last week to approve a bill amendment focused on the custody of digital assets.
“A bank may provide its customers with virtual currency custody services so long as the bank has 26 adequate protocols in place to effectively manage risks and comply with applicable laws,” the amendment says.
Initially introduced this past January by Virginia delegate Christopher T. Head, all 39 members of Virginia’s Senate greenlit the amendment. It is now waiting to be signed by Virginia governor Glenn Youngkin, after which it will become law.
In order to deliver this service to customers, the bill notes that banks will need to fulfill three requirements: (1) introduce effective risk management systems, (2) provide adequate insurance coverage, and (3) create an oversight program to deal with the risks of cryptocurrencies.
“Acting in a fiduciary capacity, the bank shall require customers to transfer their virtual currencies to the control of the bank by creating new private keys to be held by the bank.”
Customers must also create new private keys for the bank to hold on to, a move that may rankle some cryptocurrency enthusiasts who believe in decentralization.
In February, the House Committee on Financial Services also led a discussion on whether the federal government should design digital asset regulations or if it should devolve this power the states.
Congressman Patrick McHenry, the top Republican serving on the House Financial Services Committee, recommended that states should control regulation around digital assets like stablecoins.