The State Senate of Hawaii has introduced a bill that seeks to authorize banks to allow cryptocurrency in their custody.
The bill was introduced on January 17 by five senators; Gil Riviere, Sharon Moriwaki, Stanley Chang, and Les Ihara and one Republican senator Kurt Fevella.
The bill noted the set of provisions that a bank must agree to in order to provide custodial services for digital assets.
The provisions include custodial services which are to make sure a customer’s digital assets and currency are safely kept.
This is through the exercise of fiduciary and trust powers as a custodian and includes fund administration and the execution of customer instructions.
Before a bank can also be recognized as a crypto custodian, it has to adhere to certain standards regarding accounting and internal controls, maintain IT best practices, and comply with federal Anti-Money Laundering and Know Your Customer requirements.
After the bill passed the first reading on January 21, it was sent to the committees on Judiciary and Commerce, and Consumer Protection and Health on January 23.
Attempt to provide legal certainty for digital assets
In an attempt to give legal certainty to these digital assets, the proposed law would classify digital assets under the Uniform Commercial Code.
The Uniform Commercial Code is a set of federal laws in the United States that seeks to grant uniformity in legislation surrounding sales and commercial transactions in the country.
The digital assets would then be sub-categorized into digital consumer assets, digital securities, and virtual currencies. All are categorized as intangible personal property.
In addition, the bill states the methods of security interest. They are smart contracts and multi-signature arrangements.
The bill also allows courts to hear claims relating to digital assets.
With digital assets, their security interest is defined, the state courts are also given rights to hear claims in law and equity as regards digital assets.
Hawaii reducing the strictness on cryptocurrency
Previously, Hawaii had tightened the reins on firms dealing with cryptocurrency, causing the Coinbase exchange to halt its operations in the state about three years ago.
Also, the bill, if passed into law, will bring clarity to digital assets.
This is a good step as Hawaii may take over all other states in regulating the cryptocurrency industry.