The state of Hawaii is planning to regulate the use of bitcoin and digital currencies that would require licensure to transmit cryptocurrency-based funds. Two bills introduced by a group of partisan Hawaiian lawmakers are focused on digital currencies as a monetary instrument under the state’s Money Transmitters Act.
New Definitions Applied to the Hawaiian Money Transmission Act
Last week Hawaiian bureaucrats reviewed a proposed bill, HI SB3082, that aims to tether regulatory policies to digital currency transmitters. The proposed law adds new definitions like “virtual currency exchanges, transfers, and storage.” The bill will apply to anyone credited with virtual currencies, moving them, relinquishing control, and any use tied to a medium of exchange if passed. The laws will recognize bitcoin as a “permissible investment and statutory trust.” Although, if the statutes does pass, anyone who plans to transmit bitcoin and other forms of digital assets must apply for licensure.
Hawaii’s Virtual Currency Transmission Requirements
Last year Coinbase left the state of Hawaii due to the state’s proposed laws which would require licensed virtual currency transmitters to hold USD reserves. The recently submitted SB3082 has changed this requirement for specific qualified trading platforms. Applicants who want to apply for virtual currency transmission will be required to reveal a lot of information like the applicant’s name and principal address, prior criminal convictions, a description of the business activities, sample of the virtual currency instruments or products, and the name and address of the clearing banks involved. Further, for each virtual currency sale, exchanges must provide its customers with some form of a receipt.
“Each licensee who receives money or monetary value for transmission and the licensee’s authorized delegates shall provide a receipt to the customer that clearly states the amount of money or equivalent value presented for transmission and the total of the fees charged by the licensee,” explains the proposed bill.
Hawaii’s SB3082: “These Currencies Are Not Backed”
One notable section describes virtual currencies as based upon computational cryptography and derive their value “solely from the market’s perception of their value.” Hawaii’s SB3082 states:
[Virtual Currencies] can experience great swings — These currencies are not backed by any physical commodity, such as gold or silver; not backed by the United States or any other national government; not legal tender for debts; and are not insured by the Federal Deposit Insurance Corporation or any government.
The bill further details that consumers can lose all their cryptocurrencies through many attack vectors. “Computer failure; malicious software attack; an attack, closure, or disappearance of a virtual currency exchange company; lack of security; loss of your private key; or a sudden or dramatic change in value” are just a few examples explains the SB3082 text. The bill further notes:
Some virtual currency users have been unable to access their legitimate virtual currency account because of heavy traffic by other users or a prevalence of criminal activity in virtual currency use — To protect yourself, become educated as to the potential risks before deciding whether you want to transact in virtual currency.
Hawaiian officials will have a public hearing on SB3082 on February 2, 2018, at 9 am. The newly reformed money transmission act passed its first reading on January 26.