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Hawaiian House Dems Ask State Regulator to Reconsider Tough Rules for Crypto Firms

Under current requirements, exchanges must hold an amount of fiat equivalent to the value of the crypto their clients are holding.

Mar 17, 2021 at 9:20 a.m. UTC
Updated Sep 14, 2021 at 12:27 p.m. UTC

House Democrats in the Hawaii legislature are asking the state's marketplace regulator to end restrictive laws put in place against cryptocurrency businesses almost five years ago.

Policymakers have requested the Department of Commerce and Consumer Affairs reassess asset reserve requirements for crypto companies. The bill, sponsored by 10 Democrats, is currently pending before the state's House Consumer Protection & Commerce Committee, according to a public bill tracker.

Under the current requirements, exchanges must hold an amount of fiat equivalent to the value of the cryptocurrencies their clients are holding.

"The 2016 … law governing money transmitter businesses … subjected these companies to licensing and asset reserve requirements that were too burdensome for them to do business in Hawaii," the bill reads.

Indeed, several exchanges including Coinbase left the state after the requirement was implemented.

"The Division of Financial Institutions' asset reserve requirements for digital currency companies are not consistent with other states," the bill reads. "Cryptocurrency is an evolving technology globally with much still to be explored and assessed."

The current regulatory regime requires companies to obtain a money transmitter license if they are providing financial instruments for the sale or transaction with those in Hawaii even if the business is not physically present in the state.

The department also requests applicants that trade, transmit or custody crypto in the State meet financial statement requirements and that crypto value is not seen as a "permissible investment."

The state's financial regulator has taken steps to change its current regime, opening a sandbox, or testing environment, last year to test how exchanges might operate within Hawaii. A number of exchanges have since begun operating there in a limited capacity.

DISCLOSURE

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