Business 2 February 2018

Erik Gibbs

Hawaii considers forcing cryptocurrency senders to hold a license

As governments around the world still try to determine how to address the cryptocurrency explosion, Hawaii state bureaucrats are looking to implement their own controls.

Through a bill that was recently submitted by a group of legislators, Hawaii could create policy that would result in cryptocurrencies being considered monetary instruments. As such, transactions involving cryptocurrencies would fall under the Money Transmitters Act, and a license to transmit the digital currency would be required.

Bill SB3082 proposes linking digital currency senders to regulatory policies. These existing policies would be rewritten to cover “virtual currency exchanges, transfers and storage.” The bill is designed to cover anyone who is responsible for moving or relinquishing control of cryptocurrency. It would also cover any use “tied to a medium of exchange.”

If passed, anyone who wants to deal in Bitcoin Cash or any other digital asset would have to apply for a license. The same bill also would nullify the previously proposed requirement that licensed transmitters hold reserve funds.

The possibility of having to have reserve funds already caused some grief, as Coinbase left the state last year over the proposal. If the new bill is approved, only specific trading platforms would have to comply with the requirements.

Anyone who seeks a license would be required to input a lot of information on the application. Standard items such as name and address would have to be listed, as well as prior criminal convictions, description of the business activities, sample of the cryptocurrency instrument or product, as well as the name and address of any clearing banks involved.

Under the bill, all transactions would need to have a receipt generated. Any licensee or authorized delegate who receives money or digital currency would issue a receipt to the customer showing the amount of the transaction and the amount of applicable fees.

Bill SB3082 also wants a better educational awareness program regarding the pitfalls of investing in cryptocurrencies. One section of the bill wants to publicize the facts that cryptocurrency is not backed by any fiat currency or commodity, and that they can experience drastic fluctuations in value. Additionally, the bill stipulates that cryptocurrency is not legal tender for debts, nor is it insured by the Federal Deposit Insurance Corporation.

A public hearing on the bill is scheduled for February 2 at 9 a.m. Chances are fairly good that the bill will be enacted. At an early round of review by state legislators on January 26, the bill passed without any issues.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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