Virginia’s Senate on Friday unanimously approved a bill that will allow banks in the state to provide crypto custody services, granted they have enough resources to manage the associated risk. The bill will go into effect once it is signed by Governor of Virginia Glenn Youngkin.
The bill effectively allows banks to be able to hold wallet keys for customers, and is geared more towards institutional investors with large crypto holdings.
Bill intended to boost crypto investment in Virginia
The bill, no. 263, was sponsored by Delegate Christopher T. Head, with the aim of capitalizing on the growing popularity of crypto.
By codifying the ability for state-chartered banks to become custodians of cryptocurrency, this will make Virginia the first in the country to provide this ability to banks through legislation.
Delegate Head to Fox News
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The move marks another step in the growing trend of U.S. states rushing to regulate crypto. While the space is recognized at a Federal level, not many individual states have comprehensive regulations on crypto. Last month, Colorado said it would begin accepting Bitcoin and other popular altcoins as tax payments, the first state to do so.
A boom in crypto trading through 2021 also saw several states attempt to attract investors through favorable regulation. Data from the National Conference of State Legislatures showed that 33 states had introduced legislation involving crypto in 2021.
Wyoming and Arizona also have proposed bills that will allow citizens to pay taxes in crypto. Arizona also has a proposal that intends to make Bitcoin legal tender in the state. New York City Mayor Eric Adams had also agreed to take his first three paychecks in crypto.
Crypto custody as an institutional service
Crypto custody differs from a regular wallet, and is geared more towards institutional investors. Currently, Coinbase is one of the largest players in offering crypto custody services, although Virginia’s move could now boost competition in the sector.
Several other exchanges and banks have also begun offering custody services since 2021. Storing wallet keys with a custody provider adds an extra layer of security to one’s crypto holdings, with the key holder becoming the main point of access to crypto markets for the customer.
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