The Governing body of the financial institutions in Texas, US said that only those banks, which are state-chartered, will be authorized to render any crypto custodial services. Other than these banks, no other banking institution will be permitted to provide custodial services. The Authority further noted that there is an authorized already in existence that has the power to render such services.
Texas Department of Banking is the governing body that regulates and supervises the banking sector. There are a number of several local and international banks rendering banking services in Texas. A large number of these banks are willing to join the crypto space. For this purpose, they were seeking permissions for rendering, in particular, crypto custodial services.
A notice has now been issued by the Texas Department of Banking (TDB) which has been circulated amongst the Texas banking sector. It was stated in the notice that only those banks operating in Texas will be allowed to host crypto custodial services that are Texas chartered. Any non-chartered bank will not be permitted to engage in any crypto custodial or related services.
The authority has even informed the chartered banks to deal with crypto very carefully as there are evident risks involved. Until and unless the bank has made sure that it has developed the required infrastructure, only then the bank should join the crypto space. However, compliance with state as well as federal laws is necessary for any bank that decides to render crypto custodial services.
It has further been clarified by TDB that there is a big difference between rendering services relating to crypto and normal trading. TDB also apprised that the argument that there is no authority in place to render crypto-related services is a misstatement. In fact, there is an authority in place which was developed under Code No.32.001 of the Finance Code of Texas.
It was clarified that prior to rendering any services, banks will first determine what type of crypto services they want to render. Each bank will have to determine the risks and see if their respective business models are capable of dealing with them. For instance, whether the bank would want to keep the control of cryptocurrencies to itself or whether it will be with the customers. Supposing the bank wants to keep the access key information then the backup copy of the keys would be handed over to the customer. Similarly, if the access will with the customer solely, then the customer would provide a copy to the customer.
In any case, both the options would be dependent upon the bank’s discretion told TDB.
However, before joining the crypto space, any interest bank would be duty-bound to conduct thorough due diligence. This diligence must also include the process of risk determination.
