A Texas state regulator has officially affirmed that Texas land-chartered banks are allowed to store cryptocurrencies like Bitcoin (BTC) for their customers.

The Texas Department of Banking, a land regulatory bureau chartering land banks and supervising fiscal services, issued a discover on Thursday stating that local banks are permitted to provide crypto services in the state.

The agency noted that Texas banks "may provide customers with virtual currency custody services, so long as the bank has adequate protocols in place to effectively manage the risks and comply with applicable law."

The regulator briefly explained cryptocurrencies, stressing that digital currencies do not exist in a physical form, merely on a blockchain, and thus require the owner to hold private keys to access them. The authority farther stated that banks can shop crypto on customers' behalf, either by keeping copies of the customer'southward private keys or holding the assets straight in the bank's custody by creating new private keys held by the banking company.

"As with the method of custody services, several secure storage options are available to the bank, each of which has distinctive characteristics pertaining to level of security and accessibility. The banking concern will have to determine which storage choice best fits the circumstances," the agency wrote.

Related: US FDIC seeks insight on banks' role in cryptocurrency markets

The department as well mentioned that the banking company should confirm the existence of adequate coverage with its insurance carrier as a measure to protect its crypto holdings.

The regulatory discover comes shortly after members of the Texas House of Representatives passed a bill to recognize cryptocurrencies under commercial police force final month. Other jurisdictions in the U.s., such every bit Wyoming and Nebraska, have been actively embracing crypto custody services past state-chartered banks, with Wyoming chartering Kraken exchange as its first crypto bank last September. Federally chartered banks also received authority for providing crypto custody services in July 2020.