While most digital currency analysts agree that some type of regulation is needed for the industry, they’d also tend to agree that any government intervention needs to be reasonable. The recent cryptocurrency regulatory changes in Hawaii were questionable at best, and they’ve resulted in at least one major exchange suspending its services to customers in the state. Citing the added cost burden imposed by Hawaii’s new requirements, the Coinbase exchange has announced that it will not be serving Hawaiian customers for the foreseeable future.
The announcement is the result of a decision from the Hawaii Division of Financial Institutions that was first communicated to Coinbase back in September, 2016. That decision would have required the exchange to maintain cash reserves equivalent to the value of its customers’ digital currency holdings. At today’s value, compliance would require Coinbase to have $1200 in cash reserves for every Bitcoin owned by its customers.
In a post on the Coinbase blog, company legal counsel Juan Suarez addressed the issue while breaking the bad news to customers in Hawaii:
“This policy is obviously untenable. No digital currency business — and frankly, no commercially viable business anywhere — has the capital to supplement every customer bitcoin with redundant dollar collateral.”
As part of the Coinbase announcement, customers were advised to remove their funds from the exchange and close their accounts within the next thirty days. Juarez also noted that the company could not recommend another wallet service that “meets Coinbase’s security standards and which is licensed to operate in Hawaii.”
For Hawaii's digital currency enthusiasts, there is little room for short-term optimism. However, Juarez did stress that Coinbase will be working with the state to encourage it to change its laws and policies governing cryptocurrency:
“We are heartened that members of the Hawaii State House of Representatives have recently introduced a bill that would create a digital currency and blockchain working group. We look forward to working with them, the DFI, and others to help Hawaii join nearly every other State in the Union by adopting policies that will make it practicable to operate a successful digital currency businesses in Hawaii and we hope to be back in Hawaii sometime soon.”