The Hawaii Country Senate has passed the offset reading of a nib authorizing banks to hold digital assets in their custody.

The bill was introduced on Jan. 17 by five state senators, including the only Republican fellow member of the Senate, Kurt Fevella. It passed the showtime reading on Jan. 21 and was then referred to the committees on Judiciary and Commerce, and Consumer Protection and Health on Jan. 23.

The pecker specifies the prepare of provisions which a banking company must adhere to in order to provide custodial services for digital assets. Custodial services encompass "the safekeeping and direction of customer currency and digital avails through the do of fiduciary and trust powers under this section every bit a custodian and includes fund administration and the execution of customer instructions."

In order for a bank to qualify every bit a crypto custodian, information technology has to attach to certain standards regarding accounting and internal controls, maintain IT best practices, and comply with federal Anti-Money Laundering and Know Your Client requirements

Attempt to provide legal certainty for digital assets

In improver to opening up bank regulations to include cryptocurrencies, the proposed law would allocate digital avails nether the Uniform Commercial Code — a ready of federal laws in the United States that aims to provide uniformity in legislation surrounding sales and commercial transactions in the land.

Digital assets would so further be sub-categorized as either digital consumer assets, digital securities, and virtual currencies. All are classified as intangible personal property.

Furthermore, the bill specifies the manner of perfecting a security interest in digital avails and discusses various methods such as smart contracts and multi-signature arrangements.

The proposed legislation too authorizes courts to hear claims relating to digital avails.

With digital avails, their security interest, and bank custodial services defined, the state courts are too given jurisdiction to hear claims in both constabulary and equity regarding digital assets.

Hawaii loosening the reins on cryptocurrency

Hawaii has previously imposed strict requirements on firms dealing with cryptocurrency, causing the Coinbase exchange to cease its operations in the country virtually three years ago.

If passed into police, this latest bill would not only give some clarity to classification of digital assets, bringing it in line with several other states. It would besides gear up out a framework by which whatever compliant banking concern can act every bit a crypto custodian, which would potentially see Hawaii take a atomic number 82 over many states in regulating this aspect of the cryptocurrency industry.

Additional reporting by Aaron Forest