Hawaii Considering Exemption for Virtual Currency Businesses

Hawaii, where Coinbase recently withdrew services, has added language to a bill that would exempt virtual currency businesses from it's money transmission laws.

Senate Bill 949 clarifies that decentralized virtual currency activities would not be subject to the Money Transmitters Act.

The bill adds a definition of virtual currency as:

"Decentralized virtual currency" means a medium of exchange that:
     (1)  Does not have legal tender status in any jurisdiction;
     (2)  Does not have a central repository or single administrator;
     (3)  May act as a substitute for, have an equivalent value in, or be converted to or exchanged for legal tender in at least one jurisdiction world-wide;
     (4)  Is electronically transmitted between parties without an intermediary; and
     (5)  Relies on cryptographic software protocols for currency generation and validation of transactions.

The bill then adds two very important amendments. The first being under the definition of "payment instruments" which states virtual currency would not be applicable. It currently reads:

 The term "payment instrument" does not include any credit card voucher, any letter of credit, [or] any instrument that is redeemable by the issuer in goods or services.

The amendment would revise the following:

 The term "payment instrument" does not include any credit card voucher, any letter of credit, [or] any instrument that is redeemable by the issuer in goods or services, or any instrument or order for the transmission, sale, or payment of decentralized virtual currency."

The second amendment of note is the exemptions from money transmission licensing requirements in  Section 489D-5(a):

(a)  This chapter shall not apply to:     (1)  The United States or any department, agency, or instrumentality thereof;     (2)  The United States Postal Service;     (3)  The State or any political subdivisions thereof;      (4)  The electronic transfer of government benefits for any federal, state, or county governmental agency as defined in Consumer Financial Protection Bureau Regulation E, by a contractor for, and on behalf of the United States or any department, agency, or instrumentality thereof, or any state or any political subdivisions thereof; and     (5)  The sale, receipt, storage, or transfer of decentralized virtual currency; provided that this paragraph shall not affect the status or any obligation under federal law of any person that engages in any transaction or activity involving decentralized virtual currency.

According to the latter, "storage" or "transfer" would not be covered giving Coinbase, and others, a full pass to engage the state in virtual currency transactions.

Like North Carolina, federal MSB registration requirements would still be required, however state licensing would no longer be. In Texas fashion Hawaii would not restrict exchanges, miners, and wallets either making it among the friendliest states in the United States if approved.

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Article by dinbits

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