A Texas state regulator has officially affirmed that Texas state-chartered banks are allowed to store cryptocurrencies like Bitcoin (BTC) for their customers.
The Texas Department of Banking, a state regulatory agency chartering state banks and supervising financial services, issued a notice on Thursday stating that local banks are permitted to provide crypto services in the state.
The agency noted that Texas banks “may provide customers with virtual currency custody services, so long as the bank has adequate protocols in place to effectively manage the risks and comply with applicable law.”
The regulator briefly explained cryptocurrencies, stressing that virtual currencies do not exist in a physical form, but on a blockchain and thus require the owner to hold private keys to access them. The authority further stated that banks can store crypto on customers’ behalf, either by keeping copies of the customer’s private keys or holding the assets directly in the bank’s custody by creating new private keys held by the bank.
“As with the method of custody services, several secure storage options are available to the bank, each of which has distinctive characteristics pertaining to level of security and accessibility. The bank will have to determine which storage option best fits the circumstances,” the agency wrote.
The department also mentioned that the bank should confirm the existence of adequate coverage with its insurance carrier as a measure to protect its crypto holdings.
The regulatory notice comes shortly after members of the Texas House of Representatives passed a bill to recognize cryptocurrencies under commercial law last month. Other jurisdictions in the United States like Wyoming and Nebraska have been actively embracing crypto custody services by state-chartered banks, with Wyoming chartering Kraken exchange as its first crypto bank last September. Federally chartered banks also received authorization for providing crypto custody services in July 2020.