• The Virginia Senate has authorized state banks to provide crypto custody services

  • Delegate Christopher T. Head introduced the measure (House Bill No. 263) in January 2022, seeking an amendment that would allow authorized institutions to provide cryptocurrency custody services.

    The United States Senate unanimously accepted a bill amendment request that now authorizes traditional banks in the Commonwealth of Virginia to provide virtual currency custody services.

    Delegate Christopher T. Head introduced the measure (House Bill No. 263) in January 2022, seeking an amendment that would allow authorized banks to provide cryptocurrency custody services:

    “A bank may provide virtual currency custody services to its customers as long as it has 26 appropriate mechanisms in place to successfully manage risks and comply with applicable laws.”

    The bill was passed by the Senate with a resounding 39-0 vote and is now awaiting signature by Virginia Governor Glenn Youngkin. Banks that want to provide this service to their customers must meet three particular conditions outlined in the bill: they must build appropriate risk management systems, have adequate insurance coverage, and launch an oversight program to address the dangers associated with cryptocurrencies.

    The Senate, on the other hand, will require consumers of banks to keep direct ownership of their public and private keys linked with their virtual currency, adding:

    “As a fiduciary, the bank shall require consumers to transfer their virtual currency to the bank’s management by creating new private keys to be held by the bank.”

    Other states, such as Wyoming, have recently introduced legislation to create a state-issued stablecoin.

    Just last month, the House Committee on Financial Services debated whether stablecoin and digital asset rules should be handled at the state or federal level.

    In this regard, Patrick McHenry, a North Carolina Representative and ranking committee member, suggested the committee to investigate state-level regulatory frameworks in lieu of a full federal statute on stablecoins.

    According to Jean Nellie Liang, the undersecretary for domestic finance at the Department of Treasury, U.S. dollar-pegged stablecoin issuers — both state and federally chartered banks — should be held to the same standards as insured depository institutions, citing a report from the President’s Working Group on Financial Markets.

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