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Hawaiian lawmakers seek to allow banks to offer crypto custodial services

Image by Erik Cooper from Flickr

Mon, 27 Jan 2020, 08:05 am UTC

On Jan. 18, the lawmakers in Hawaii submitted a bill to allow banks to offer crypto custodial services, CoinDesk reported.

The bill is sponsored by five state senators including Gil Riviere, Sharon Moriwaki, Stanley Chang, Les Ihara and Kurt Fevella, the only Republican member of the Hawaii Senate. It passed the first reading on Jan. 21.

The bill clearly defined what custodial services are. It also specified the set of provisions that banks have to follow to render the said service.

“‘Custodial services’ means the safekeeping and management of customer currency and digital assets through the exercise of fiduciary and trust a custodian and includes fund administration and the execution of customer instructions,” the bill read.

The bill also stated that a bank may provide custodial services upon providing 60 days written notice to the commissioner. The provisions are cumulative and not exclusive. Here are some of the provisions it should comply with:

  1. Implement all accounting, account statement, internal control, notice, and other standards specified by applicable state or federal law and rules for custodial services;
  2. Maintain information technology best practices relating to digital assets held in custody. The commissioner may specify required best practices by rule;
  3. Fully comply with applicable federal anti‑money laundering, customer identification, and beneficial ownership requirements; and
  4. Take other actions necessary to carry out this section, which may include exercising fiduciary powers similar to those permitted to national banks and ensuring compliance with federal law governing digital assets classified as commodities.

Currently, the Hawaii Division of Financial Institutions requires licensed crypto entities to hold fiat reserves equal to their crypto holdings. The bill doesn’t seem to address this “double reserve” problem,” as termed by Coinbase, but is expected to give more clarity to local banks regarding cryptocurrencies.

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