Hawaiian Bills Would Capture Crypto Under Money Transmission Law

Two bills introduced in the Hawaiian Senate last week are aiming to define and include virtual currencies within domain of the state’s Money Transmitters Act.

If passed, HI SB2853 and HI SB3082 would require those seeking to transmit virtual currencies in the state to have a license to do so. They would also mandate that these persons or businesses issue a warning to consumers prior to enabling such transactions.

However, the legislation notably exempts exchanges from section 489D-8 of the Act, which mandates money transmitters maintain cash reserves equal to the virtual currency funds held for clients. Hawaii’s Division of Financial Institutions previously indicated it planned to leave the requirement intact, prompting U.S. exchange Coinbase to terminate its services in the state.

Still, while including a carve-out, HI SB3082 further features a warning that cautions against the volatility of cryptocurrencies, and emphasizes that they are not backed or insured by any government or commodities.

It reads:

“You should be aware that there is a potential for you as a consumer to lose all of your virtual currency. Though cash can also be lost, with virtual currency this loss can occur because of a 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.”

Both bills come on the heels of the state’s adoption of the Uniform Regulation of Virtual Currency Businesses Act, a proposed model legislation published in 2017 as a guide for states seeking to enact policies and provisions relating to the technology.

Specifically, the template was drafted by the Uniform Law Commission (ULC), which authors non-partisan legislation to bring clarity to areas where it is wanting in state statutory law.

Map image via Shutterstock.