U.S. Senate allows Virginia banks to offer crypto custody services

On March 5, the U.S. Senate allowed Virginia banks to offer crypto custody services. The U.S. Senate unanimously approved a request for an amendment to the bill that now allows traditional banks operating in the Commonwealth of Virginia to offer virtual currency custody services.

Representative Christopher T. Head introduced the bill (House Bill 263) back in January 2022, seeking amendments that would allow qualifying banks to offer cryptocurrency custody services "as long as the bank has 26 appropriate agreements to be effective" By managing risk and complying with applicable laws, banks can offer virtual currency custody services to their customers." The bill passed the Senate by a 39-0 vote and is awaiting Virginia Gov. Glenn Youngkin's signature into law.

Banks intending to offer this service to customers need to comply with three specific requirements mentioned in the act – implementing an effective risk management system, having adequate insurance coverage, and launching a surveillance program to address risks associated with cryptocurrencies.

However, the Senate will require the bank's customers to retain direct control over the public and private keys associated with their virtual currency, adding: "The bank should act in a fiduciary capacity requiring customers to, by creating new private keys held by the bank, hand over its virtual currency to bank control.”