Pub.16 2021-22 Issue 2

NEBANKERS.ORG 14 COUNSELOR’S CORNER — continued from page 13 Gray Derrick is a partner at Baird Holm LLP and chair of the Firm’s Technology and Intellectual Property Section. He focuses his practice on developing, acquiring, and using technology and other forms of intellectual property. J. Scott Searl is a partner at Baird Holm LLP and the Firm’s Financial Services Industry Team leader. Scott represents banks, bank holding companies and their owners on mergers and acquisitions, corporate governance and regulatory matters. Carrie Schwab and Greg Dittman, summer associates of the Firm, contributed to this article. customer identification and beneficial ownership requirements under the Bank Secrecy Act and policies and procedures of the depository; • If the customer is a legal entity, then it must provide reasonable evidence that it conducts a lawful, bona fide business; • The terms and conditions of a customer’s digital asset depository account must include a list of mandated disclosures, such as a schedule of fees and the manner and timing of their calculation, statements that digital asset depository accounts are not FDIC insured and that an investment in digital assets is volatile and may result in total loss of value and other statements outlined in NFIA relating to risks associated with digital assets; and • All advertising, marketing materials and websites must also include conspicuous notices that digital asset deposits and accounts are not FDIC-insured, as well as the text of a statutory notice outlined in NFIA regarding the substantial risk and speculative nature of holding digital assets. NFIA also includes additional restrictions that apply uniquely to newly chartered digital asset depository institutions (as opposed to departments established within existing financial institutions), including: • Requiring “digital asset bank” to be used in the institution’s name so that it does not resemble the name of any other financial institution transacting business in Nebraska; • Prohibiting acceptance of U.S. currency demand deposits or U.S. currency that may be withdrawn by check or similar means; and • Prohibiting consumer, commercial, or mortgage loans of any fiat currency, including temporary credit relating to overdrafts. If a financial institution serves as a qualified custodian for a registered investment adviser, NFIA sets forth additional restrictions to those services. What’s Next? NFIA authorizes the Department to adopt rules and regulations necessary to implement the Act, providing further guidance regarding the Act’s provisions. Federal bank regulators are also expected to issue guidance concerning digital assets. The law will continue to evolve in this area. Banks, bank executives and bank owners interested in the potential expansion of banking services to digital assets services or the entrance into such area by non-bank owners 1 On June 10, 2021 the Texas Department of Banking issued a notice affirming that Texas state-chartered banks may provide customers with virtual currency custody services, provided the bank has adequate protocols in place to effectively manage the risks and comply with applicable law. 2 NFIA also adds a new section to the Nebraska Uniform Commercial Code relating to controllable electronic records, including security interests in digital assets. NFIA’s provisions relating to the creation and operation of digital asset depositories become effective October 1, 2021. The remainder of the Act (including the UCC provisions which are not discussed in this articles) is effective July 1, 2022. 3 “Financial institutions” under NFIA include national or state chartered banks, S&Ls, savings banks, building and loan associations and trust companies; credit unions are not included. 4 The Department shall electronically send notice of the hearing to financial institutions in Nebraska, federal agencies and financial industry trade groups. should continue to monitor these legal developments and best practices that may apply to digital asset services covered by NFIA. 

RkJQdWJsaXNoZXIy MTIyNDg2OA==