January 21 and 23 had set a new mark in Hawaii’s realm of digital assets. The date of passage for first reading and referral to the committees, respectively, are giving light to this new crypto-related law. The Senate Bill (S.B) 2594, if passed, can grant the state’s commercial banks the right to custody among their customer’s cryptocurrencies.
Simply put, a qualified bank should observe and adhere to specific provisions in the bill – all of which pertain to custodial services of these digital assets. Private keys revolve around these custodial services that cover the trust and fiduciary power of banks to administer funds and crypto-assets following their customer’s instructions.
With Hawaii recognized for implementing strict requirements for crypto-licensed entities, a bank’s eligibility to be a crypto-custodian can be challenging. One should be complying with Know Your Customer (KYC) requirements as well as with the federal’s Anti-Money Laundering act. Apart from that, the bank should also be conforming to standards related to internal controls, accounting, and information technology (IT).
Notably, the bill is a sign of development to crypto-related businesses in the area. The four Democratic senators, and Republic senator, Kurt Favella made the affair possible when it made to the reading last January 17. Now that it is close to success, a door to potential changes on cryptocurrency seemed to have opened.
Beaming Line of Legal Security among Digital Assets
It is under the Uniform Commercial Code (UCC) to which digital assets would be classified. The United States made it to the point that all sales and commercial-related transactions must stick to the said code. Following UCC, assets will then be sub-categorized as digital securities, virtual currencies, digital consumer assets, or open Blockchain tokens.
Security interest remains as one of the chief goals of the bill. Methods such as multi-signature arrangements and smart contracts are at the line of considerations once it would be approved. The legislation also authorizes and gives jurisdiction for courts to hear claims belonging to digital asset cases.
Hawaii’s slackening grip on cryptocurrency
The struggle to a smooth cryptocurrency flow in Hawaii is evident with Coinbase exchange shuttering its primary operations in 2017. It is with the state’s strict requirements that legislative effort like SB2594 is bringing up a significant change.
It might not be the best or the most appropriate solution to the problem. However, the bill is expected to give legal clarity to Hawaiian banks. With this initiative, Hawaii can be an actual pacesetter. It could take lead to some significant transformations on the cryptocurrency trade.