Virginia State Senate Allows State Banks to Offer Cryptocurrency Bank Custody Services!

The Virginia Senate has unanimously approved a request to amend a bill that would allow conventional banks operating in the Virginia of the Commonwealth to provide cryptocurrency custody services.

Rep. Christopher T. Head presented Head. T Christopher Bill 263, January 2022, seeking an amendment allowing eligible banks to offer cryptocurrency bank custody services:

“The bank may provide its customers with cryptocurrency bank custody services, as long as the bank has 26
An appropriate protocol for effective risk management and compliance with applicable laws.”

Notably, the bill passed 39-0 and is expected to be signed into law by Virginia Governor Youngkin Glenn.
Banks that intend to provide this service to customers will also need to comply with three specific requirements mentioned in the bill: implementing effective risk management systems, having adequate insurance coverage, and launching a supervisory program to address risks associated with cryptocurrencies.

While the Senate will require bank customers, to retain direct control of their public and private keys associated with their virtual currency:

“The bank, in its fiduciary capacity, should require customers to convert their virtual currency under its supervision,
By creating new private keys that he keeps.”

Other states, such as Wyoming, have also recently seen a proposal to legalize a state-issued stablecoin.
Of note here, the House Committee on Financial Services had a discussion about whether regulations on stablecoins and digital assets should be addressed at the state or federal level.
In this regard, North Carolina representative and rating committee member McHenry Patrick asked the committee to consider state-level regulatory frameworks, rather than a comprehensive federal law on stablecoins.

Finally, citing a report from the President’s Working Group on Financial Markets, Treasury Under Secretary for Domestic Finance Liang Nellie Jean said that issuers of stablecoins pegged to the US dollar should be subject to the same standards as insured depository institutions.

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