Texas Banks Can Now Store Bitcoin for Clients

Key Takeaways

  • The Texas Department of Banking has allowed state-chartered banks to provide custody services for crypto investors.
  • The regulator clarified that custody services would only be allowed for banks that establish adequate protocols.
  • The notice follows the state’s approval of a bill recognizing commercial investments in cryptocurrency.

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The Texas Department of Banking has confirmed that state-licensed banks can offer cryptocurrency custody services to clients.

Texas Issues Notice on Crypto Custody 

The Texas Department of Banking has allowed state charted banks to store crypto assets on behalf of clients.

In a Thursday notice, the banking regulator announced that state-chartered in Texas are now permitted to provide custody services on cryptocurrency investments under the Texas Finance Code § 32.001.

The notice added that to have custody over client’s funds, interested banks could store a copy of the private keys of their clients’ assets or have clients transfer funds into wallets controlled only by the banks.

While giving banks the control of private keys to banks is at odds with the ethos underpinning the cryptocurrency movement, it is a much-needed step for institutional adoption. As per U.S. legal requirements, institutional investors must have their assets, including cryptocurrencies, stored securely with a qualified third-party custodian such as a bank.

At the same time, safely storing cryptocurrency is a serious matter and requires a level of understanding that banking institutions may not always have.

Policies around the security of funds are a critical requirement for crypto custody. Security options include cold storage and multi-signature wallets, as well as insurance coverage.

The notice recognized that banks may not possess the ability to securely safeguard cryptocurrencies, an asset class that is prone to frequent hacks and thefts. In the notice, Texas Department of Banking pointed out that the custody of crypto…

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