The Texas Department of Banking gave state-chartered banks the go-ahead to custody crypto assets

The Texas Department of Banking has issued a notice confirming that state-regulated banks can store cryptocurrencies on behalf of customers, as long as they have the right protocols in place to comply with the law.

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Source: The Texas Department of Banking

The Texas Department of Banking gave state-chartered banks the go-ahead to custody crypto assets

While that seems like a big win for the state’s crypto companies and users, from the department’s perspective, nothing has really changed.

The Department of Banking wrote:

“Texas state-chartered banks have long provided their customers with safekeeping and custody services for a variety of assets. 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.”

The announcement gives interested banks the option of storing copies of their private keys or even accepting electronic transfers into a single bank-controlled wallet. They may also partner with third parties to provide such services.

Furthermore, fiduciary banks may offer escrow services, which means they have certain legal obligations to their clients, including keeping the asset safely and returning it unharmed upon request.

It added:

“What virtual currency custody services a bank chooses to offer will depend on the bank’s expertise, risk appetite, and business model. For instance, the bank may choose to allow the customer to retain direct control over their own virtual currency and merely store copies of the customer’s private keys associated with that virtual currency. Alternatively, the bank may cause the customer to transfer their virtual currency directly to the control of the bank, creating new private keys that are then held by the bank on behalf of the customer.”

If the news sounds familiar, the U.S. national banking regulator made a similar announcement last year, greenlighting crypto custody as an interpretation of existing law. State banking regulations differ from federal ones, providing financial institutions with a degree of choice. Since 1999, however, Texas banking regulations have provided super parity with national banks.

In other words, a Texas-regulated bank can do anything a federally regulated bank can do. That makes Texas a desirable place for financial institutions to do business. It has the second most banks in the country, behind only California, per the Federal Deposit Insurance Corporation.

Texas, meanwhile, is developing particularly favorably for the crypto industry. Governor Greg Abbott recently took to Twitter to promote a new law that promotes state engagement with blockchain.

Bitcoin miners have flocked to take advantage of the regulatory environment as well as the abundant wind energy supply in West Texas.

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