• Fed Announces that Reserve Banks will adopt ISO 20022 Standards
• Current banking language makes it difficult to efficiently process wire transfers globally.
• ISO 20022 compliant cryptos include Bitcoin, Iota, and Algorand.

On Monday, May 2, 2022, the Federal Reserve Board announced that Federal Reserve Banks will adopt the ISO^® 20022 message format for the Fedwire^® Funds Service.

According to a press release by the Federal Reserve, this new format will allow for an “enhanced efficiency of both domestic and cross-border payments, and a richer set of payment data that may help banks and other entities comply with sanctions and anti-money laundering requirements.”

Virginia Senate Passes Bill Allowing State Banks to Offer Crypto Services

ISO 20022 was presented by the organization as a means of developing communication between financial institutions. The new standards propose that it will make financial transactions more efficient, unlike today’s standards. Currently, banking institutions are using their own programming languages, making it difficult to transfer funds internationally.

The ISO 20022 was developed by the International Organization for Standardization, an independent, non-governmental organization that addresses and issues standards for a wide range of industries, including financial institutions.

The revised plan for migrating the Fedwire Funds Service to the new message format was invited for public comment by the Board, saying:

Comments are due 90 days after publication in the Federal Register, which is expected shortly.

The Board wants the Reserve Banks to adopt the new message format on a single day instead of in three separate phases as previously proposed.

Cryptocurrencies to keep an eye on that are compliant with ISO 20022 proposed messaging standards include: Bitcoin (CCC:BTC-USD), XDC (CCC:XDC-USD), Iota (CCC:MIOTA-USD), and Algorand (ALGO-USD).

Ripple (CCC:XRP-USD), and Stellar Lumens (CCC:XLM-USD) are not only ISO 20022-compliant, but they are also members of the ISO 20022 Standards Body, according to the Registration Management Group Member List website.

The Fedwire Funds Service is a real-time gross settlement system that’s owned and operated by the Federal Reserve Banks.

It allows businesses and financial institutions to transfer funds quickly and securely, and it’s a vital tool for the global economy.

• Governor Gavin Newsom issues executive order on blockchain aligns with the Biden administration proposal in March.
• The governor is calling on the state of California to look into using the technology in state operations.
• California aims to create a transparent and consistent business environment for companies operating in Web3.

Over the course of a decade, tech investors and businesses in California have bet on the future of digital currency. Just recently, the governor of the State with the largest economy is now a part of the movement.

On Wednesday, the Governor of California, Gavin Newsom issued an executive order on cryptocurrencies, laying out a road map for regulatory and consumer protections and examining ways the state can take advantage of the technology.

This comes as the Senate of the State of Virginia passes House Bill 263, allowing state banks to participate in the services of cryptocurrencies.

Senior advisor to Newson, Dee Dee Myers, tells CNBC:

Of the 800 blockchain businesses in North America, about a quarter of them are in California, dramatically more than any other state. We’ve heard from so many that they want to be here, and we want to help them do that responsibly.

The goal of the order is to create a transparent and consistent business environment for companies that are operating in Web3 technologies. New regulatory frameworks for companies that operate in California will also be helped by this.

Agencies within the Newson administration are required to submit their findings and recommend next steps.

According to the order, it will “reflect consultation with relevant state agencies regarding the forthcoming federal reports on the relationship of crypto assets to priorities in energy, climate, and preventing criminal activity.”

Myers said the agencies plan to hold roundtables and listening sessions with industry leaders, consumer advocates, and even critics.

The White House is in the process of economic reform and new legislation continues to be introduced almost daily. With cities like Miami aiming to become the “Wall Street of Cryptocurrencies,” we may see a spike in adoption much sooner than expected.

Currently, there are over 30 States drafting legislation in support of Biden’s Executive Order, which addresses the responsible development of digital assets.

• Virginia Senate passes bill allowing state banks to offer custodial services for bitcoin and other cryptocurrencies.
• To determine whether or not to offer custodial services, banks will have to follow self-assessment criteria.
• New virtual currency private keys must be generated for and held by the bank if they choose to operate as a fiduciary.

Passing HB 263 comes soon after Blackrock launched a crypto ETF allowing investors exposure to the cryptocurrency sector.

Senate member for the state of Virginia, Christopher T. Head introduced House Bill 263 in early January 2022.  HB 263 allows traditional banks operating in the Commonwealth of Virginia to offer custodial services for Bitcoin and other cryptocurrencies.

To offer custodial services, banks must go through a process of self-assessment that requires them to carefully examine the risks involved in offering such services.

Virginia House Bill 263 outlines:

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.

Proper insurance and maintenance of the service are required.

The bill goes on to state that in addition to all of the requirements in the legislation, banks must implement effective risk management, controls for measuring, and control of relevant risks associated with cryptocurrencies.

Under the proposed law, banking infrastructure could participate in a fiduciary or non-fiduciary capacity.

Any financial institution that wants to operate in a fiduciary manner:

“Acting in a fiduciary capacity, the bank shall require customers to transfer their virtual currencies to the control of the bank by creating new private keys to be held by the bank.”

If a bank wants to operate in a non-fiduciary manner:

“In providing such services in a non-fiduciary capacity, the bank shall act as a bailee, taking possession of the customer’s asset for safekeeping while legal title remains with the customer, meaning that the customer retains direct control over the keys associated with their virtual currency.”

With a unanimous 39-0 vote, the Virginia Senate passed the bill allowing banks to offer virtual currency custody services.

Virginia House Bill 263 finally heads to Governor Glenn Youngkin’s desk to be signed into law.