Cryptocurrency regulations are in the limelight again. Even with the U.S. federal government dallying on this front and pushing regulations down the line, some states are taking things into their hands.
Latest on that line is Virginia, which recently voted to allow state banks to hold crypto and offer digital asset services.
Crypto Welcome Here
This month, the Senate of Virginia unanimously approved a bill to allow traditional banks in the state to offer cryptocurrency and virtual asset services. The bill - titled House Bill No. 263 - was introduced by Delegate Christopher T. Head in January to allow eligible banks in the Commonwealth of Virginia to offer virtual currency assets. Now that it’s passed, Virginia has opened a new way to encourage businesses to set up.
House Bill 263 passed the Virginia Senate in a 39-0 vote and is now set to be signed into law by Republican Governor Glenn Youngkin. As it states, banks willing to offer crypto services to their clients will need to meet three requirements - adequate insurance coverage, effective risk management structures, and an oversight program that helps to address the risks of digital assets.
“A bank may provide its customers with virtual currency custody services so long as the bank has 26 adequate protocols in place to effectively manage risks and comply with applicable laws,” the bill says in part.
However, it is worth noting that banks will also control their customers’ public and private wallet keys. Customers will need to transfer their assets to the banks’ control, meaning that these banks will need to establish a framework that ensures fund safety.
Wyoming’s Possible Stablecoin
Virginia has become the latest state to implement some form of crypto regulations of its own. The state is looking to stimulate investment and make it easier for crypto-loving citizens and businesses to access banking services. And it is now a question of what other moves the state might take to embrace crypto.
As expected, Virginia isn’t the only state making progress on crypto regulations. Just last month, four lawmakers in Wyoming sponsored a bill that will enable the state treasurer to issue a dollar-backed stablecoin.
State Senators Tara Nethercott and Chris Rothfus and House Representatives Mike Yin and Jared Olsen introduced Senate File SF106, titled the “Wyoming Stable Token Act.” The bill is now in reading, and its passage will authorize the Wyoming state treasurer to issue a stablecoin that is redeemable in fiat and held in a state-controlled account.
The state treasurer is expected to consult with the treasury department’s Investment Funds Committee. The treasurer will also be able to hire professionals in the finance space to help with issuing the asset and building the right rules for its operation.
Can Ukraine Finally Push Congress?
While states continue to push their crypto agenda, Washington remains relatively quiet. There is still no stance from the federal government concerning regulating crypto, despite hearings from some top executives in the industry over the subject.
However, the conflict in Ukraine has spurred some government officials to call for action. Jerome Powell, the Chairman of the Federal Reserve, recently called on Congress to take action on crypto if they hope to stop Russia from using crypto to evade sanctions imposed by the international community.
Massachusetts Democrat Senator Elizabeth Warren has also called on the Treasury Department to take action on crypto in the wake of Russia’s invasion of Ukraine. In a letter sent to Treasury Secretary Janet Yellen, Sen. Warren - as well as Senators Mark Warner (D-VA), Sherrod Brown (D-OH), and Jack Reed (R-RI) - called on Secretary Yellen to prevent Russia from using crypto to hide cross-border transactions amid the sanctions.
The lawmakers asked that the Treasury Department should provide information about how they plan to ensure that the crypto industry stays compliant with the current sanctions.
It is unlikely that even the Ukraine conflict will finally cause Washington to bring crypto regulation to the table. However, if Congress can prove that Russia is indeed evading sanctions with crypto, perhaps we could see some action. For now, states will most likely have to continue pursuing their visions of crypto regulation as they hope to improve access to the crypto market in their own way.