Hawaii State Senate Authorizes Banks To Offer Crypto Custody

The Hawaii State Senate is in the latest cryptocurrencies news now for passing the first reading of a bill that authorizes banks to hold digital assets in their custody. This bill was introduced on January 17 and was designed five state senators, including the Republican member of the Senate, Kurt Fevella. The bill passed the first reading on January 21 and was then referred to the committees of the Judiciary and Commerce, as well as Consumer Protection and Health on January 23.

Basically, the bill specifies the set of provisions which a bank must adhere to and provide custodial services for digital assets. As you may not know, the custodial services cover “the safekeeping and management of customer currency and digital assets through the exercise of fiduciary and trust powers under this section as a custodian and includes fund administration and the execution of customer instructions.”

Now, in order from a bank from Hawaii to qualify as a crypto custodian, it must adhere to certain standards in regards to accounting and internal controls. It also needs to maintain IT best practices and comply with the federal Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements.

Aside from opening up bank regulations to include cryptocurrencies, this proposed law would also classify cryptocurrencies under the Uniform Commercial Code – which is a set of federal laws in the US that wants to provide uniformity in legislation surrounding sales and commercial transactions in the country.

The bill also specifies the manner of perfecting a security interest in digital assets. It discusses various methods such as smart contracts and multi-signature arrangements. The proposed legislation also authorizes the courts to hear claims which are related to digital assets.

Previously in our altcoin news section, we reported about Hawaii imposing strict requirements on firms dealing with cryptocurrency. This caused the Coinbase exchange to cease its operations in the state almost three years ago.

If passed in law, the latest bill by the Hawaii State Senate would not only give clarity to classification of cryptocurrencies – it will also bring them in line with several other states and set out a framework by which any compliant bank can act as a crypto custodian.