By Shelly Melancon (Switzerland)
On March 4, the senate of the US state of Virginia approved a bill that authorizes banks to start offering crypto custody services. However, the banks need to prove that they have enough buffer to accommodate any resulting risks from the services.
The bill, which was unanimously approved, became effective upon the state Governor’s signature, Glenn Youngkin. Examples of crypto custody services banks could offer include holding wallet keys for their clients and crypto investment service options for their top clients.
Boosting Crypto Activities In Virginia
Delegate Chris Head sponsored this newly approved bill (tagged bill number 263). Head stated that he decided to sponsor the bill to enable the state to benefit from the growing adoption and popularity of the crypto industry. Speaking with Fox News, the head also said, “the approval of this makes Virginia the first US state to legalize banks’ crypto custody services.”
Virginia adds to the growing number of us states approving crypto-related policies. Even though the federal government has recognized the crypto sector, it is yet to approve a comprehensive crypto policy. Hence, many states are developing their crypto policies based on information available to them but in line with SEC regulations regarding financial matters and the selling of securities.
A few weeks ago, Colorado became the first state to officially announce that its residents can pay their taxes through digital assets. Many American states are pushing favorable crypto policies to attract crypto investors as this sector’s popularity and adoption continue to grow globally.
Also read:A recent report from the national conference of state legislatures revealed that more than 30 states had approved crypto-related policies in the last 12 months. Asides from Colorado, Arizona, and Wyoming legislators, are also about to approve a bill proposal that would enable citizens to pay their taxes through digital currencies.
Rising Number Of Crypto Custody Service Providers
Arizona is about to approve a policy that would enable its residents to settle their financial transactions through crypto. Also, Eric Adams (Mayor of NYC) recently announced that he would prefer to receive his first three months’ salary in digital currencies.
The provision of crypto custody services is usually intended for institutional investors. Coinbase is arguably the biggest crypto custody service provider right now. However, it may have more competition once this Virginia’s proposed bill becomes effective.
Many other financial institutions and crypto exchanges started providing crypto custody services last year. Crypto investors usually seek this service to enhance their crypto holdings’ security further.
The SEC Is About To Update Its Crypto Custody Rule
Recent remarks from the SEC’s director of Investment Management, William Birdthistle, show that the SEC is about to change its crypto custody rules. Speaking at the just-concluded IAA investment adviser compliance conference, Birdthistle stated that it has become imperative for the SEC to make changes to its Adviser Act (AKA the custody rule) to define the qualifications of a custodian.
The previous policy states that only financial institutions can be custodians. However, Coinbase and other firms not specified in the Advisers Act now provide custodian services. He further said that the sec would make recommendations based on public comments concerning the matter.
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