Virginia Passes Bill To Allow Banks Provide Custody Service For Cryptocurrencies

As cryptocurrencies gain wide acceptance, several states have enacted laws that would allow financial institutions to provide crypto services to their citizens. 

On the 4th of March, the Senate of Virginia fully backed a bill that would allow state banks to provide custody services for cryptocurrency if they have the resources to handle the related risk. The legislation will be effective once the governor of Virginia, Glenn Youngkin, signs it.

Basically, the bill permits banks to store wallet keys for their clients, and it is aimed mainly at institutional investors who have substantial crypto holdings.

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The Bill Is Meant To Increase Crypto Activities In The State 

Congressman Christopher Head introduced the legislation, no. 263, to leverage on the rising popularity of cryptocurrency.

By institutionalizing the capacity of state-owned banks to become cryptocurrency custodians, Virginia will be the first state in the US to grant this capability to its banking institutions through legislation.

The action is another phase in the rising trend of states in the United States racing to regulate cryptocurrency. Although digital currency is recognized at the national level, few states have complete crypto legislation. In February, Colorado became the first state to accept BTC and other notable cryptocurrencies as a payment method for tax.

Other States And Crypto Regulations

In 2021, when cryptocurrency trading was on the rise, several states made moves to entice investors with friendly legislation. Most crypto investors prefer to live in a region where the laws guiding the usage of digital currencies are favorable. 

According to a report from the National Conference of State Legislatures (NCSL), over 33 states have initiated crypto-related legislation in 2021. Arizona and Wyoming have also introduced legislation that would allow residents to pay their taxes in cryptocurrency. Arizona has also proposed making Bitcoin a legal means of exchange in the state. Mayor of New York, Eric Adams, agreed to accept his salaries for three months in cryptocurrency.

Crypto Custodial Rights As A Service For Institutions

Crypto custody varies from a typical wallet in that it caters to institutional investors. Coinbase is already one of the leading providers of custodian services in the state, but Virginia’s decision may increase competition.

Since 2021, more exchange firms and financial institutions have begun to offer custody services for crypto. Keeping the wallet keys to a crypto account with a custodial provider gives an added layer of protection to one’s crypto assets. This is because the key holder now serves as the customer’s primary portal to access the crypto markets. Security is very important, considering the recent hack on crypto wallets in the past months. Even secure platforms have been hacked by Internet fraudsters who are always looking for a loophole in the server.

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