Testimony: SB2697 provides best pathway for cryptocurrency in Hawaii
from Grassroot Institute of Hawaii, February 8, 2022
The following testimony was submitted by the Grassroot Institute of Hawaii for consideration on Feb. 7, 2022, by the Senate Committee on Energy, Economic Development and Tourism.
___________
To: Senate Committee on Energy, Economic Development and Tourism
Senator Glenn Wakai, Chair
Senator Bennette E. Misalucha, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive Vice President
RE: SB2697 — RELATING TO VIRTUAL CURRENCY
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer its comments on SB2697, which would exclude the electronic transfer of virtual currency through virtual cryptocurrency companies from the Money Transmitters Act.
This bill provides the best, simplest and most comprehensive policy option to a problem that has stymied the growth of cryptocurrency in Hawaii: the “double reserve” requirement in the state Money Transmitters Act, which has been applied to companies that deal in digital currency.
Currently, the Money Transmitters Act requires digital currency companies to hold cash assets equal to the amount of their virtual assets. Thus, a company that holds $1 billion in Bitcoin and Etherium also must have an additional $1 billion in cash reserves.
This requirement has made it nearly impossible for cryptocurrency companies to do business in Hawaii. Coinbase and Binance — the two largest cryptocurrency exchanges — do not operate in Hawaii. Nor do RobinHood Crypto, KuCoin, PayPal’s “Cryptocurrency Hub,” eToro, Bitstamp or any number of other popular and successful crypto companies. As a result, Hawaii has been largely left out of the cryptocurrency revolution.
In 2019, Gov. David Ige authorized a temporary “Digital Currency Innovation Lab,” a regulatory “sandbox” that allowed certain cryptocurrency companies to do business in Hawaii without being subject to the money-transmitter law’s double-reserve requirement. Since the lab’s inception, 61,000 Hawaii customers have been able to access digital currency and complete more than $611 million in transactions.
Unfortunately, the Innovation Lab will end at the close of 2022. Without further action from the Legislature, cryptocurrency will once again become inaccessible for Hawaii residents. Moreover, the state will lose access to the economic benefits of this rapidly expanding industry.
SB2687 provides the best and most efficient pathway for the future of cryptocurrency in Hawaii. Currently, 20 states do not require a money-transmitter license for digital currency transactions.[1] By excluding digital currency companies from the state’s Money Transmitters Act,[2] Hawaii would go from one of the most burdensome states for cryptocurrency to one of the best.
After Wyoming exempted cryptocurrency companies from its double-reserve requirement in 2018, it was dubbed one of the country’s “most crypto-friendly” jurisdictions. [3]
Cryptocurrency is a developing industry that moves as quickly as the technology involved. While federal and state governments may eventually promulgate rules regarding cryptocurrency, now is not the time to handicap the industry with heavy state regulations.
This bill would avoid the problem of enacting restrictions on cryptocurrency that could quickly become outdated or overly burdensome. Instead, it focuses on the main barrier that has prevented Hawaii residents and businesses from profiting from the cryptocurrency boom: the state’s Money Transmitters Act.
It is clear that exempting digital currency companies from Hawaii’s Money Transmitters Act is the best way to allow cryptocurrency to grow and thrive in our state. For that reason, SB2697 deserves your support.
Thank you for the opportunity to submit our comments.
Sincerely,
Joe Kent
Executive Vice President
Grassroot Institute of Hawaii
_______________
[1] Those states are: Arizona, Arkansas, California, Colorado, Idaho, Illinois, Kansas, Maryland, Massachusetts, Michigan, Montana, New Hampshire, New Jersey, North Dakota, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia and Wisconsin
[2] “Money Transmitters Act,” HRS 489D.
[3] Chris Matthews, “How Wyoming became the promised land for bitcoin investors,” MarketWatch, April 24, 2021; “What do Wyoming’s 13 new blockchain laws mean?” Forbes.com, March 4, 2019; HB0019 of 2018 Wyoming Legislature; and Erik Kuebler, “Wyoming House unanimously approves two pro-blockchain bills.” Bitcoin Magazine, Feb. 20, 2018.
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Testimony: SB3076 would encumber cryptocurrency, not liberate it
from Grassroot Institute of Hawaii, February 8, 2022
The following testimony was submitted by the Grassroot Institute of Hawaii for consideration on Feb. 8, 2022, by the Senate Committee on Commerce and Consumer Protection and Senate Committee on Energy, Economic Development and Tourism. Testimony delivered to the committees via Zoom follows.
_____________
To: Committee on Commerce and Consumer Protection
Senator Rosalyn H. Baker, Chair
Senator Stanley Chang, Vice Chair
To: Committee on Energy, Economic Development, and Tourism
Senator Glenn Wakai, Chair
Senator Bennette E. Misalucha, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive Vice President
RE: SB3076 — RELATING TO SPECIAL PURPOSE DIGITAL CURRENCY LICENSURE
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer its comments on SB3076, an 88-page tome of a bill that would establish a program for the licensure, regulation and oversight of digital currency companies.
We appreciate the goal of creating a pathway for cryptocurrency companies to operate in Hawaii. However, SB3076 has unclear language and too many hurdles that could cement Hawaii as one of the worst states in the nation for cryptocurrency and cut residents off from this emerging market.
We urge lawmakers to delete the most burdensome regulatory aspects of this bill, or, better yet, support SB2697 and its companion HB2287, which would exempt cryptocurrency companies from Hawaii’s money-transmitter law — considered by cryptocurrency companies to be the main stumbling block to operating here.
Among the issues with SB3076 that need to be addressed:
>> Its approach is banking-centric.
Much of the bill’s language was derived from model legislation provided in August 2021 by the Conference of State Banking Supervisors, of which Iris Ikeda, commissioner of the Hawaii Division of Financial Institutions, is a board director at large.[1] So far, not one state has enacted any of its recommendations.[2]
Not surprisingly, SB3076 takes a banking-centric approach to cryptocurrency legislation, but many companies that use cryptocurrency are different from banks. For example, the bill could be interpreted as requiring food establishments to obtain a “special purpose digital currency license” in order to accept cryptocurrency as payment.
On page 4 of the bill, “digital currency business activity” is defined as “exchanging, transferring, or storing digital currency,” but Section 2 of the bill, which starts on page 8 and outlines exclusions to its proposed regulations, does not include food establishments.
On page 10, SB3076 says it will not apply to financial institutions that are “chartered or licensed by chapter 412.”
Hawaii’s Chapter 412 defines a Hawaii financial institution as a bank, savings bank, savings and loan association, depository financial services loan company, nondepository financial services loan company, trust company, credit union or intra-Pacific bank.[3]
This presumably means that Hawaii financial institutions could buy, sell and exchange Bitcoin and other cryptocurrencies without needing a special purpose digital currency license.
It is a welcome idea to afford banks the freedom to interact with the emerging cryptocurrency market without the need for a special license. However, it is odd that other companies would be required to get a special license to use cryptocurrency.
>> Its tangible net worth requirement is unclear.
Section 16 of the bill, starting on page 45, would require licensees to meet a “tangible net worth” requirement. However, it is unclear exactly how much money that “tangible net worth” would have to be.
Section 23, subsection 2, on page 65, states that a license can be revoked if the “licensee’s tangible net worth becomes inadequate.” But, again, the bill doesn’t specify exactly what would be inadequate or adequate.
The CSBS model legislation, while overly burdensome, at least clarifies a tangible net worth requirement,[4] stating that “A licensee under this [Act] shall maintain at all times a tangible net worth of the greater of $100,000 or 3 percent of total assets for the first $100 million.”
But this ratio is not clear in SB3076, and should be stated explicitly.
>> Its reserve requirement is not clear.
In a House Committee on Finance hearing on Jan. 18, 2022, Iris Ikeda said that the bill would require licensed cryptocurrency companies to have a “one-to-one” reserve ratio.[5] However, this “one-to-one” ratio is not clearly specified in the bill.
If the reserve ratio requirement is indeed one-to-one, that should be specified in the bill.
SB3076 also does not make it clear whether cryptocurrency can be used as a “permissible investment,” and this effectively could create a “double reserve” requirement, such as exists in Hawaii’s current money-transmitter law,[6] whereby a company holding $1 billion of cryptocurrency would also need to hold $1 billion of cash.
This problem exists because Hawaii’s money-transmitter law does not allow cryptocurrency to be used as a permissible investment.[7] Thus, cash must be used, effectively creating a double- reserve requirement. In 2017, this double-reserve requirement prompted Coinbase, the world’s leading cryptocurrency exchange, to leave Hawaii.[8]
If the intent is to encourage cryptocurrency exchange companies in Hawaii, SB3076 should state clearly whether cryptocurrency can be used as a permissible investment in the calculation of its reserve requirement.
>> Its explanation for determining “tangible net worth” is not clear.
Section 16, page 45, of the bill states that licensees must meet a “tangible net worth” requirement, then offers a convoluted explanation of how that net worth would be calculated.
Specifically: “A licensee engaged in digital currency business activity may include in its calculation of tangible net worth digital currency, measured by the average value of the digital currency in U.S. dollar equivalent over the prior six months, excluding control of digital currency for a person entitled to the protections pursuant to section 14.”
This explanation would seem to suggest that the company net worth is calculated against the average price of cryptocurrencies over the previous six months, which could be problematic for cryptocurrency companies.
For example, the average price of Bitcoin over the past six months was $50,114. But the price on Feb. 4, 2022 was $40,709, which is a 20% decrease. Thus, if a company had $1 billion in Bitcoin today, it presumably would need $200 million of additional cash to account for the drop in value and meet the tangible net worth requirement.
This would effectively require cryptocurrency companies to hold excessive amounts of cash as a buffer, which would effectively be similar to a double-reserve requirement. This also could result in cryptocurrency exchange companies exiting or avoiding the state.
>> It is unclear whether customers need to be licensed.
On page 4 of SB3076, the definition of “digital currency business activity” includes “transferring” digital currency. On page 7, the definition of “transfer” includes moving digital currency to a hard wallet. On page 13, it is stated that a license would be required for “digital currency business activity.” Taken together, these three statements make it appear that someone would need a license to transfer cryptocurrency to their own wallet.
However, a statement on page 8 seems to exclude “the exchange, transfer, or storage of digital currency … regulated by the Electronic Fund Transfer Act of 1978, 15 U.S.C. Section 1693 through 1693r, the Securities Exchange Act of 1934, 15 U.S.C. Sections 78a through 78oo, or the Commodity Exchange Act, 7 U.S.C. Sections 1 through 27f.”
And in Section 2, subsection 8, page 10, the bill says “a person that (A) Does not receive compensation from a person for: (i) Providing digital currency products or services; or (ii) Conducting digital currency business activity” also is excluded.
So essentially, the bill is not clear about whether cryptocurrency customers would need to be licensed. And, of course, the default should be against requiring customers to obtain a cryptocurrency license, because that would be excessively burdensome.
>> It requires undue surveillance and lacks surveillance security.
In Section 8 of SB3076, starting on page 22, the bill says licensed cryptocurrency companies would be required to provide to the state massive amounts of surveillance data on customer financial transactions.
By contrast, Hawaii’s money-transmitter law, on page 12, requires licensees to submit only to the federal government, and not necessarily to the state, any reports that are required by the federal government.[9]
Hawaii’s government does not have a good track record for keeping its data systems secure, as evidenced by the multiple hacks that have occurred in recent years.[10] Requiring that cryptocurrency companies hand over vast amounts of financial information to the state is unnecessary and could create a “honeypot” for hackers to attack that would put Hawaii residents’ financial information in jeopardy.
If anything, SB3076 should duplicate the money-transmitter requirement that cryptocurrency companies file to the federal government reports required by the federal government.
>> Its license fees seem discriminatory and unreasonably high.
SB3076 requires licensees to pay an annual fee of $50,000. By contrast, the annual fee for money transmitters is only $2,000.
Ideally the fees for both should be equal, and preferably both at the lower amount, if Hawaii wishes to encourage more entrants in the emerging cryptocurrency market.
Conclusion
SB3076 as written could cement into place the most burdensome cryptocurrency regulations in the nation, in addition to causing confusion.
If the members of the two committees considering this bill are committed to using it as the vehicle to help Hawaii participate more fully in the worldwide cryptocurrency market, the Grassroot Institute of Hawaii recommends that all the burdensome aspects of the bill — such as its unreasonable net worth requirements, dubious surveillance requirements and high fees — be deleted. This bill also needs to be written more plainly, to prevent needless confusion.
For the record, however, we believe a much better option would be for your committees to shift their support from SB3076 to SB2697 and its companion in the House, HB2287, both of which would simply exempt cryptocurrency from Hawaii’s money-transmitter law and truly open the door to cryptocurrency exchange companies in Hawaii.
Thank you for the opportunity to submit our comments.
Sincerely,
Joe Kent
Executive Vice President
Grassroot Institute of Hawaii
_________________
[1] “CSBS Leadership,” Conference of State Banking Supervisors, accessed Feb. 5, 2022.
[2] “CSBS Model Money Transmission Modernization Act,” Conference of State Banking Supervisors, Jan. 6, 2022. See also, “CSBS Uniform Money Transmission Modernization Act,” Conference of State Banking Supervisors, August 2021, pp. 45-52.
[3] 412:1-109, which states, “A Hawaii financial institution may be a bank, resulting bank as defined in article 12, savings bank, savings and loan association, depository financial services loan company, nondepository financial services loan company, trust company, credit union, or intra-Pacific bank.”
[4] “CSBS Model Money Transmission Modernization Act.” See also, “CSBS Uniform Money Transmission Modernization Act,” p. 34.
[5] “FIN Info Briefing — Tue Jan 18, 2022 @ 1:30 p.m.,” YouTube video, Hawaii House of Representatives, Jan. 18, 2022 at 51’:51”.
[6] “Money Transmitters Act,” HRS489D.
[7] “Money Transmitters Act,” pp. 3-4.
[8] Juan Suarez, “How Bad Policy Harms Coinbase Customers in Hawaii,” Coinbase, Feb. 27, 2017.
[9] “Money Transmitters Act,” p. 12.
[10] Peter Boylan, “Cyberattacks hit at least 3 Hawaii government systems in past week,” Honolulu Star-Advertiser, Dec. 14, 2021, and Sam Spangler, “Hawaiian Electric attacked daily by hackers as White House warns of ransomware,” KHON2, Hawaii News Now, June 8, 2021.
______________
Senator Roslayn Baker: We also have testimony on this matter from Grassroots Institute of Hawaii, Joe Kent.
Joe: Thanks so much, Chair, and just a correction: It’s Grassroot Institute.
I really appreciate you allowing me to testify today. My name is Joe Kent and I’m the executive vice president of the Grassroot Institute. We think this bill is well-intentioned. I’m so glad that Commissioner [Iris] Ikeda [of the state Division of Financial Institutions] had developed this study and looked into this matter thoroughly.
However, respectfully, we still believe this protects consumers too much. If you create a nest of regulations, it’s very difficult to unwind it later on.
A much better approach would be to have a light touch approach and then, if something is needed, then act on that. This [bill] would levy the very strict regulations right at the get go and that could hamper the market in Hawaii, which has already been hurt.
A few notes: This bill was derived from model legislation provided by the Conference of State Banking Supervisors. It’s modeled after uniform legislation that has not yet been enacted in any state. The CSBS legislation does clarify the tangible net worth requirement.
I was glad to hear that Commissioner Ikeda suggested a few additions to the bill, although I wish I could remember exactly what she said at the moment, but I believe she said that the net worth requirement would be more clearly defined. I think she said something like not less than $500,000, so I hope we could ask her to clarify exactly what that was because that is important.
The bill does still have a lot of the other confusing issues. Do food establishments need to be licensed? Does Toys “R” Us need to be licensed? If they accept cryptocurrency, for example.
Do customers need a license? Does the state have to collect surveillance information over customers’ finances?
These are all important questions and could be dealt with in future years.
We strongly support a different bill which would take a light touch approach, just like 20 other states. SB2697 would align Hawaii and default us to one of the best dates for cryptocurrency instead of this bill.
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Testimony: Digital currency bill SB3025 better than SB3076, but still a rat’s nest
from Grassroot Institute of Hawaii, February 8, 2022
The following written testimony was submitted by the Grassroot Institute of Hawaii for consideration on Feb. 8, 2022, by the Senate Committee on Commerce and Consumer Protection and the Senate Committee on Energy, Economic Development and Tourism. Testimony delivered to the committees via Zoom follows.
_____________
To: Senate Committee on Commerce and Consumer Protection
Senator Rosalyn H. Baker, Chair
Senator Stanley Chang, Vice Chair
To: Senate Committee on Energy, Economic Development and Tourism
Senator Glenn Wakai, Chair
Senator Bennette E. Misalucha, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive Vice President
RE: SB3025 — RELATING TO DIGITAL CURRENCY LICENSING PROGRAM
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer its comments on SB3025, a 62-page bill that would establish a program for the licensure, regulation and oversight of digital currency companies.
SB3025 seems to be a shorter version of SB3076, but with welcome features such as:
>> A lower annual flat fee of $7,000, down from the $50,000 in SB3076.
>> A clear statement that cryptocurrency is a “permissible investment,” which is not the case in SB3076.
While SB3025 is a “better” bill than SB3076, like SB3076 it still has unclear language and includes too many hurdles that could cement Hawaii as one of the worst states in the nation for cryptocurrency and cut off residents from this emerging market.
We urge lawmakers to delete the most burdensome regulatory aspects of this bill, or, better yet, support SB2697 and its companion HB2287, which would simply exempt cryptocurrency from Hawaii’s money-transmitter law — considered by cryptocurrency companies to be the main stumbling block to operating here.
Among the issues with SB3025 that need to be addressed:
>> Its approach is banking-centric.
Much of the bill’s language was derived from model legislation provided in August 2021 by the Conference of State Banking Supervisors, of which Iris Ikeda, commissioner of the Hawaii Division of Financial Institutions, is a board director at large.[1] So far, not one state has enacted any of its recommendations.[2]
Not surprisingly, SB3025 takes a banking-centric approach to cryptocurrency legislation, but many companies that use cryptocurrency are different from banks. For example, the bill could be interpreted as requiring food establishments to obtain a “special purpose digital currency license” in order to accept cryptocurrency as payment.
On page 5 of the bill, “digital currency business activity” is defined as “exchanging, transferring, or storing digital currency,” but Section 2 of the bill, which starts on page 10 and outlines exclusions to its proposed regulations, does not include food establishments.
On page 20, SB3025 says it will not apply to financial institutions that are “chartered or licensed by chapter 412.”
Hawaii’s Chapter 412 defines a Hawaii financial institution as a bank, savings bank, savings and loan association, depository financial services loan company, nondepository financial services loan company, trust company, credit union or intra-Pacific bank.[3]
This presumably means that Hawaii financial institutions could buy, sell and exchange Bitcoin and other cryptocurrencies without needing a special purpose digital currency license.
It’s a welcome idea to afford banks the freedom to interact with the emerging cryptocurrency market without the need for a special license. However, it is odd that other companies would be required to get a special license to use cryptocurrency.
>> Its tangible net worth requirement is not clear.
Section 6 of the bill, starting on page 18, would require licensees to meet a “tangible net worth” requirement. However, it is unclear exactly how much money that “tangible net worth” would have to be.
The CSBS model legislation, while overly burdensome, at least clarifies a tangible net worth requirement,[4]stating that “A licensee under this [Act] shall maintain at all times a tangible net worth of the greater of $100,000 or 3 percent of total assets for the first $100 million.”
But this ratio is not clear in SB3076, and should be stated explicitly.
>> Reserve ratio not clear.
In a House Committee on Finance hearing on Jan. 18, 2022, Iris Ikeda said that the bill would require licensed cryptocurrency companies to have a “one-to-one” reserve ratio, also known as a double reserve.[5]
If the reserve ratio requirement is indeed one-to-one, that should be specified in the bill.
>> Its explanation for determining “tangible net worth” is not clear.
Section 6, page 18 of the bill states that licensees must meet a “tangible net worth” requirement, then offers a convoluted explanation of how that net worth would be calculated.
Specifically, “A licensee engaged in digital currency business activity may include in its calculation of tangible net worth digital currency, measured by the average value of the digital currency in U.S. dollar equivalent over the prior six months, excluding control of digital currency for a person entitled to the protections pursuant to section 14.”
This explanation would seem to suggest that the company net worth is calculated against the average price of cryptocurrencies over the previous six months, which could be problematic for cryptocurrency companies.
For example, the average price of Bitcoin over the past six months was $50,114. But the price on Feb. 4, 2022 was $40,709, which is a 20% decrease. Thus, if a company had $1 billion in Bitcoin today, it presumably would need $200 million of additional cash to account for the drop in value and meet the tangible net worth requirement.
This would effectively require cryptocurrency companies to hold excessive amounts of cash as a buffer, which would effectively be similar to a double-reserve requirement. This also could result in cryptocurrency exchange companies exiting or avoiding the state.
>> It is unclear whether customers need to be licensed.
On page 5 of SB2035, the definition of “digital currency business activity” includes “transferring” digital currency. On page 9 and 10, the definition of “transfer” includes moving digital currency to a hard wallet. On page 13, it is stated that a license would be required for “digital currency business activity.” Taken together, these statements make it appear that someone would need a license to transfer cryptocurrency to their own wallet.
However, a statement on page 10 seems to exclude “the exchange, transfer, or storage of digital currency … to the extent of the Electronic Fund Transfer Act of 1978, 15 U.S.C. Section 1693 through 1693r, the Securities Exchange Act of 1934, 15 U.S.C. Sections 78a through 78oo, or the Commodity Exchange Act, 7 U.S.C. Sections 1 through 27f.”
And in Section 2, subsection b (9), page 12, the bill says “a person that (A) Does not receive compensation from a person for: (i) Providing digital currency products or services; or (ii) Conducting digital currency business activity” also is excluded.
So essentially, the bill is not clear about whether cryptocurrency customers would need to be licensed. And, of course, the default should be against requiring customers to obtain a cryptocurrency license, because that would be excessively burdensome.
>> It requires undue surveillance and lacks surveillance security.
In Section 6 of SB3025, starting on page 18, the bill says licensed cryptocurrency companies would be required to provide to the state massive amounts of surveillance data on customer financial transactions.
By contrast, Hawaii’s money-transmitter law, on page 12, requires licensees to submit only to the federal government, and not necessarily to the state, any reports that are required by the federal government.[6]
Hawaii’s government does not have a good track record for keeping its data systems secure, as evidenced by the multiple hacks that have occurred in recent years.[7] Requiring that cryptocurrency companies hand over vast amounts of financial information to the state is unnecessary and could create a “honeypot” for hackers to attack that would put Hawaii residents’ financial information in jeopardy.
If anything, SB3025 should duplicate the money-transmitter requirement that cryptocurrency companies file to the federal government reports required by the federal government.
Conclusion
SB3025 is a slightly better version of SB3076, since its barriers to market entry are somewhat lower. However, worrisome aspects remain. As written, SB3025 would cement into place some of the most burdensome cryptocurrency regulations in the nation, in addition to causing confusion.
If the members of the two committees considering this bill are committed to using it as the vehicle to help Hawaii participate more fully in the worldwide cryptocurrency market, the Grassroot Institute of Hawaii recommends that all the burdensome aspects of the bill — such as its unreasonable net worth requirements, dubious surveillance requirements and high fees — be deleted. This bill also needs to be written more plainly, to prevent needless confusion.
For the record, however, we believe a much better option would be for your committees to shift their support from SB3025 to SB2697 and its companion in the House, HB2287, both of which would simply exempt cryptocurrency from Hawaii’s money-transmitter law and truly open the door to cryptocurrency exchange companies in Hawaii.
Thank you for the opportunity to submit our comments.
Sincerely,
Joe Kent
Executive Vice President
Grassroot Institute of Hawaii
[1] “CSBS Leadership,” Conference of State Banking Supervisors, accessed Feb. 5, 2022.
[2] “CSBS Model Money Transmission Modernization Act,” Conference of State Banking Supervisors, Jan. 6, 2022. See also, “CSBS Uniform Money Transmission Modernization Act,” Conference of State Banking Supervisors, August 2021, pp. 45-52.
[3] 412:1-109, which states, “A Hawaii financial institution may be a bank, resulting bank as defined in article 12, savings bank, savings and loan association, depository financial services loan company, nondepository financial services loan company, trust company, credit union, or intra-Pacific bank.”
[4] “CSBS Model Money Transmission Modernization Act,” p. 34.
[5] “FIN Info Briefing — Tue Jan 18, 2022, @ 1:30pm,” YouTube video, Hawaii House of Representatives, Jan. 18, 2022 at 51’:51”.
[6] “Money Transmitters Act,” HRS489D, p. 12.
[7] Peter Boylan, “Cyberattacks hit at least 3 Hawaii government systems in past week,” Honolulu Star-Advertiser, Dec. 14, 2021. Sam Spangler, “Hawaiian Electric attacked daily by hackers as White House warns of ransomware,” KHON2, June 8, 2021.
______________
Sen. Rosalyn Baker: Grassroots Institute of Hawaii, Joe Kent.
Joe Kent: Aloha, chair and committee member. My name is Joe Kent and I’m the executive vice president of the Grassroot Institute of Hawaii.
Respectfully, we believe that SB3025 has overly stiff regulations that could cement Hawaii for decades to come as one of the worst states for cryptocurrency. We are already the worst, if you measure it by how many companies don’t want to come here or have left us. But this bill, the licensure bill, could actually make it even worse than that.
Not to mention the bill is also unclear. My testimony outlines a lot of things that need to be clarified. For example, it’s unclear whether food establishments would need a license to accept cryptocurrency or other establishments. The tangible net worth requirement is unclear. The bill never defines exactly what the tangible net worth requirement is. The calculation for the tangible net worth requirement is also unclear and would require excessive amounts of cash as a buffer.
It’s also not clear whether customers would need to be licensed or not. Also, the bill has a lot of undue state surveillance requirements over customers’ finances. This could create a honeypot for hackers and Hawaii doesn’t have a good track record for not being hacked.
The bottom line is, this bill could prevent locals from engaging in this emerging market and diversifying our economy.
Again, we’re already the worst state, let’s lift the regulations to help us become better.