Texas state-chartered banking institutions will now be permitted to offer digital currency custody services to its clients, according to a notification issued by the Texas Department of Banking. The notification, which was published on June 10th, urged banks to maintain efficient practices and a solid risk-management service provider supervision system.
Underneath the Texas Finance Code 32.001, state-chartered institutions in Texas claim to have the right to offer clients with a variety of asset custody services, which implies they may also provide similar services for digital currencies.
“Texas state-chartered banks have long provided their customers with safekeeping and custody services for a variety of assets. These services play a crucial role in the business of banking as customers look to banks to offer secure and dependable storage. 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”
The notice’s criteria define “necessary measures” that banks must adhere to if they wish to offer digital currency services. The following are a mix of administrative and technical control mechanisms:
“Necessary controls consist of administrative controls, such as policies and procedures; technical controls, such as access controls and authentication; and physical controls, such as protection of hardware and data specific to the virtual currency held. The bank should also confirm the existence of adequate coverage with its insurance carrier”
The consumer can keep direct custody of their cryptocurrency and merely keep copies of their digital keys, or the bank can keep secret keys on their behalf. Because of the many fiduciary methods, banks will be required to adhere to a complete custodial contract under which any bank operating in a fiduciary position would have the right to handle digital currencies as it would any other sort of asset.
As institutions begin to offer these sorts of custodial services, additional legislation will be required to keep up with the amount of new services being offered, as well as the growing demand for digital currencies, both in terms of variety and worldwide acceptance.