Hawaii senators file a bill to allow banks to offer crypto custody services

Quick Take

  • Hawaii senators have filed a bill that would allow banks to act as crypto custodians
  • If passed, Hawaiian banks will be allowed to hold digital assets on behalf of their customers

Five lawmakers from the U.S. state of Hawaii have introduced a bill seeking to authorize banks to provide custody for cryptocurrencies.

The Senate bill 2594, if passed, would make it legal for Hawaiian banks to hold digital assets, including "virtual currencies," “digital securities" and “open blockchain tokens” for their customers.

The bill has been filed by four Democratic senators (Gil Riviere, Sharon Moriwaki, Stanley Chang, and Les Ihara) and one Republican senator (Kurt Fevella). Introduced last week, the bill has passed first reading and has been referred to the Senate Committee on Commerce, Consumer Protection and Health (CPH) and the Senate Committee on Judiciary (JDC).

Hawaii has since long been known to have stringent requirements for crypto businesses. In 2017, the state’s Division of Financial Institutions mandated crypto-licensed entities to hold cash reserves equal to their crypto holdings held on behalf of customers. The decision saw Coinbase shuttering its operations in the state at the time.

The new bill also requires banks to maintain reserves, like a trust company under section 412:8-202. Per the section, “"every trust company shall have on hand at all times in actual money of the United States an amount equal to at least twelve per cent of all agency credit balances payable on demand and of accounts payable, plus at least five per cent of all agency credit balances payable on time; provided that such reserve may be deposited payable on demand in banks and other trust companies approved by the commissioner or may be cash in the vaults of the trust company."

Elsewhere, the bill also mentions private keys and multi‑signature wallets. “A secured party, or an agent, custodian, fiduciary, or trustee of the party, has the exclusive legal authority to conduct a transaction relating to a digital asset, including by means of a private key or the use of a multi‑signature arrangement authorized by the secured party."

Customers could also authorize banks to transact with their cryptocurrencies. “A bank and a customer shall agree in writing regarding the source code version that the bank will use for each digital asset [...] Any ambiguity under this subsection shall be resolved in favor of the customer," per the bill. 

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