Newly Passed Bill in Hawaii to Allow Banks Become Custodians of Crypto

The Hawaiian State Senate has scaled the first reading of a bill that will authorize commercial banks to hold cryptocurrencies.

The bill was submitted on the 17th of January by 5 senators. It scaled the first reading on the 21st of this month and was subsequently forwarded to the council tasked with consumer protection and health on the 23rd for further deliberation.

The bill outlines the conditions that must be met by a bank for it to become an authorized custodian of cryptocurrencies. Being a custodian involves the safekeeping and management of cryptocurrencies owned by customers by exercising certain fiduciary duties. The bank also has to meet certain standards involving accounting, uphold optimum IT policies, and obey federal Anti-Money Laundering and KYC prerequisites.

Provision of Legal Certainties for Digital Assets
The proposed bill will categorize digital assets under the Uniform Commercial Code. The UCC is a set of laws in the US that delivers uniformity in legislation involving commercial transactions in the country.

Digital assets will then be further sub-classified as either digital consumer assets, digital securities, or virtual currencies. However, they are all deemed as intangible personal properties.

With all the intricacies involved with digital assets and custodial services explained, this bill gives state courts the authority to hear cases concerning digital assets.

The bill also explains how to perfect security interests in digital assets and reviews several methods like smart contracts and multi-signature agreements.

Taking a Lighter Stance Towards Cryptocurrencies
Previously, Hawaii was known to be quite unwelcoming to cryptocurrency-related companies. In 2017, authorities of the country placed some stringent rules on crypto-related companies in the country, causing many of them to end operations and flee.

If this bill is passed into law, not only will it foster the growth of crypto businesses in the country but it will also create a guideline for banks (that have met all the prerequisites) to become cryptocurrency custodians. This will see Hawaii become a powerhouse in the regulation of this facet of the crypto sector.