STAND. COM. REP. NO. 2329

Honolulu, Hawaii

RE: S.B. No. 2697

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committee on Energy, Economic Development, and Tourism, to which was referred S.B. No. 2697 entitled:

"A BILL FOR AN ACT RELATING TO VIRTUAL CURRENCY,"

begs leave to report as follows:

The purpose and intent of this measure is to exclude the electronic transfer of virtual currency through virtual currency companies and cryptocurrency companies from the Money Transmitters Modernization Act.

Your Committee received testimony in support of this measure from seven individuals. Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs' Division of Financial Institutions, Hawaii Technology Development Corporation, and Grassroot Institute of Hawaii.

Your Committee finds that the Division of Financial Institutions of the Department of Commerce and Consumer Affairs and the Hawaii Technology Development Corporation have jointly created a two-year sandbox, called the Digital Currency Innovation Lab (DCIL), to allow for limited activity of digital currency companies, virtual currency companies, and cryptocurrency companies in the State to better understand the cryptocurrency industry and determine the best method of its regulation and oversight. Your Committee further finds that there are approximately sixty-one thousand digital currency consumers who have completed more than $611,000,000 in transactions with the fifteen cryptocurrency-based companies that have been accepted into DCIL. Your Committee recognizes that digital currency transactions are not like money transmissions and do not fit into the licensing scheme under the State's Money Transmitters Modernization Act under chapter 489D, Hawaii Revised Statutes. Your Committee further recognizes with the end of DCIL in June 30, 2022, this measure would allow virtual currency activity to legally continue in the State.

Accordingly, your Committee has amended this measure by making a technical, nonsubstantive amendment for the purposes of clarity and consistency.

Your Committee notes that with the exclusion of virtual currency transactions from the State's Money Transmitters Modernization Act, there will be no consumer protection, regulation, or oversight for these transactions and respectfully requests that your subsequent Committees on Commerce and Consumer Protection and Ways and Means further examine these issues.

As affirmed by the record of votes of the members of your Committee on Energy, Economic Development, and Tourism that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2697, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2697, S.D. 1, and be referred to your Committees on Commerce and Consumer Protection and Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Energy, Economic Development, and Tourism,

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GLENN WAKAI, Chair