SB 2757: DCCA; DFI; Digital Asset Companies; Digital Asset Charter; Appropriation

THE SENATE	S.B. NO.	2757
THIRTY-THIRD LEGISLATURE, 2026		S.D. 2
STATE OF HAWAII

A BILL FOR AN ACT

 

 

RELATING TO DIGITAL ASSET CHARTERS.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that the use and trading of digital assets, including cryptocurrencies, e-money, network money, e-cash, and other forms of digital currencies, are growing in global popularity.  Digital assets have value but may be recorded in decentralized ledgers or company databases and do not have a physical form like bank notes or coins.  Most digital assets are not issued by government bodies and are not considered legal tender.  Although some states treat digital assets as falling within the states' money transmitter laws, the industry is largely unregulated in the United States.

     The legislature further finds that in 2020, the Hawaii technology development corporation partnered with the department of commerce and consumer affairs' division of financial institutions to conduct a pilot project on digital currencies.  The pilot project included the establishment of the Hawaii digital currency innovation lab to study the landscape of digital currency activities within the State.  The pilot project's findings indicated that digital asset companies do not require a State‑issued money transmitter license to conduct business in Hawaii.  Although some federal regulations apply to digital asset activities, the lack of state regulation may place consumers at risk of fraud and financial abuse.  The legislature believes that the pilot project's findings, and the financial risks to consumers, support the need for a new state regulatory framework for digital asset companies and digital asset activities.

     Accordingly, the purpose of this Act is to:

     (1)  Establish a digital asset charter program to license, regulate, and oversee digital asset companies and digital asset business activities; and

     (2)  Authorize any company that participated in the Hawaii digital currency innovation lab to temporarily continue conducting digital asset business activities without a charter, in certain circumstances.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

digital asset CHARTERS

PART i.  GENERAL PROVISIONS

     §   -1  Definitions.  As used in this chapter:

     "Charter" means the digital asset licensure required under this chapter.

     "Commissioner" means the commissioner of financial institutions for the department of commerce and consumer affairs.

     "Consumer" means a natural person who engages in a digital asset transaction primarily for personal, family, or household purposes.

     "Control over a digital asset" means the power to execute unilaterally or prevent indefinitely a digital asset transaction.

     "Control person" means a person that directly or indirectly exercises control over a digital asset.

     "Department" means the department of commerce and consumer affairs.

     "Digital asset" means an electronically stored unit of value that can be owned, transferred, or traded.  "Digital asset" includes a digital representation of value that:

     (1)  Has a centralized depository or administrator, including stablecoins;

     (2)  Is decentralized and has no centralized depository or administrator; or

     (3)  Is created or obtained by a computing or manufacturing effort.

     "Digital asset" does not include a digital representation of value that cannot be converted into, or redeemed for, currency or another digital asset but is:

     (1)  Used solely within an online gaming platform;

     (2)  Redeemable for goods, services, discounts, or purchases as part of a customer affinity or rewards program offered by the issuer or another designated merchant; or

     (3)  Accessed via a prepaid card.

     "Digital asset administration" means the issuance of a digital asset with the authority to redeem the digital asset for money, bank credit, or another digital asset.

     "Digital asset business activity" means business activities that involve:

     (1)  Exchanging, transferring, or storing a digital asset or engaging in digital asset administration, whether directly or through an agreement with a digital asset control-services vendor;

     (2)  Exchanging one or more digital representations of value used within an online game, gaming platform, or family of games for moneys or bank credit outside that online game, gaming platform, or family of games, if the moneys or bank credit are offered by or on behalf of the same publisher from which the original digital representation of value was received;

     (3)  Storing, holding, or maintaining custody or control of a digital asset on behalf of another person; or

     (4)  Buying or selling a digital asset as a business; performing exchange services as a business; or controlling, administering, or issuing a digital asset.

     "Digital asset company" means a person or company holding a charter under this chapter to engage in digital asset business activities.

     "Digital asset control-services vendor" means a person that has control of a digital asset owned by a third party, under an agreement with another person.

     "Division" means the division of financial institutions of the department of commerce and consumer affairs.

     "Elder" means a person who is sixty-two years of age or older.

     "Examination" means a scheduled review by the division, not requiring a prior complaint, to verify that the digital asset company is operating within the law.

     "Exchange" means the conversion of:

     (1)  Fiat currency or another asset of value into a digital asset;

     (2)  A digital asset into fiat currency or another asset of value; or

     (3)  One form of digital asset into another form of digital asset.

     "Fiat currency" means a government-issued currency that is not backed by a physical commodity, such as gold or silver.

     "Investigation" means a review by the division based on a prior complaint or a report indicating that the digital asset company is not operating within the law or is experiencing financial or other difficulties.

     "NMLS" has the same meaning as defined in section 454F-1.

     "Person" means an individual, sole proprietorship, partnership, corporation, limited liability company, limited liability partnership, or other association of individuals, however organized.

     "Stablecoin" means a digital asset designed to maintain a stable value by being:

     (1)  Attached to a traditional currency like the United States dollar or an exchange-traded commodity; or

     (2)  Backed by reserves to reduce price volatility.

     "Stored value" means a monetary value that is evidenced by an electronic record.

     "Tangible net worth" means total assets, excluding intangible assets, less total liabilities, in accordance with generally accepted accounting principles of the United States.

     "Transfer" means to assume control of a digital asset from or on behalf of another person and to:

     (1)  Credit the digital asset to the account of another person;

     (2)  Move the digital asset from one account to another account belonging to the same person; or

     (3)  Relinquish control of a digital asset to another person.

     "United States dollar equivalent of the digital asset" means the equivalent value of the digital asset in United States dollars on a specific date or during a specified period, as determined by a United States-based digital asset exchange.

     §   -2  Exemptions.  This chapter shall not apply to:

     (1)  The exchange, transfer, or storage of a digital asset, or to digital asset administration, to the extent regulated by the Securities Exchange Act of 1934, as amended (15 U.S.C. 2B, et seq.), or the Commodity Exchange Act of 1936, as amended (7 U.S.C. 1, et seq.);

     (2)  Activity by a person that only:

          (A)  Contributes connectivity software or computing power to a:

               (i)  Decentralized digital asset; or

              (ii)  Protocol governing the transfer of the digital asset;

          (B)  Provides data storage or security services for a business engaged in digital asset business activities but does not otherwise engage in digital asset business activities on behalf of another person; or

          (C)  Provides to a person that is otherwise exempt from this chapter a digital asset as an enterprise solution used solely between the two parties; provided that the person has no agreement or relationship with the end user of the digital asset;

     (3)  A person using a digital asset, including creating, investing, buying, selling, or obtaining the digital asset, as payment for the purchase or sale of goods or services solely for academic purposes;

     (4)  A person whose annual digital asset business activity with, or on behalf of, other persons is reasonably expected to be valued, in the aggregate, at $5,000 or less, measured by the United States dollar equivalent of the digital asset;

     (5)  An attorney who provides escrow services to a person;

     (6)  A securities intermediary, as defined in section 490:8-102, or commodity intermediary, as defined in section 490:9-102;

     (7)  A digital asset control-services vendor;

     (8)  A person that:

          (A)  Does not receive compensation from another person for:

               (i)  Providing a digital asset product or service; or

              (ii)  Conducting digital asset business activities; or

          (B)  Is engaged in testing products or services with the person's own funds or digital assets;

     (9)  Non-custodial digital asset business activities by a person using a digital asset that has been:

          (A)  Acknowledged as legal tender by the United States or a government recognized by the United States; or

          (B)  Determined not to be a security by a United States regulatory agency;

    (10)  Banks, bank holding companies, credit unions, savings banks, financial services loan companies, or mutual banks organized under the laws of the United States or any state; or

    (11)  Any other person or class of persons that the commissioner declares exempt from this chapter.

     §   -3  Powers of commissioner.  In addition to any other powers provided by law, the commissioner may:

     (1)  Adopt rules pursuant to chapter 91 as necessary for the administration of this chapter;

     (2)  Issue declaratory rulings or informal, nonbinding interpretations of this chapter;

     (3)  Investigate and conduct hearings regarding any violation of this chapter or any rule, order, or agreement adopted under this chapter;

     (4)  Create fact-finding committees to make recommendations to the commissioner and to support the commissioner's deliberations;

     (5)  Require a charter applicant or any of the applicant's control persons, executive officers, directors, general partners, or managing members, to disclose any relevant criminal history and request a criminal history record check to be conducted pursuant to chapter 846; provided that the applicant shall pay all applicable fees for each criminal history record check;

     (6)  Contract with or employ qualified persons who may be exempt from chapter 76, including accountants, attorneys, investigators, examiners, auditors, or other professionals, to assist the commissioner in exercising the commissioner's powers and duties;

     (7)  Process and investigate complaints, subpoena witnesses and documents, administer oaths, receive affidavits and oral testimony, conduct contested case proceedings under chapter 91, and take other actions as necessary to exercise the commissioner's powers and duties under this chapter;

     (8)  Require each digital asset company to comply, to the same extent and in the same manner as a bank chartered by the State, with:

          (A)  Any rule, guidance, guideline, statement, supervisory policy, or any similar proclamation issued or adopted by the Federal Deposit Insurance Corporation; and

          (B)  Any policy of the Conference of State Bank Supervisors;

     (9)  Enter into agreements or relationships with other government officials or regulatory associations to improve efficiencies and reduce regulatory burden by sharing resources; standardized or uniform methods or procedures; and documents, records, information, or evidence obtained under this chapter;

    (10)  Use, hire, contract, or employ publicly or privately available analytical systems, methods, or software to investigate or examine a digital asset company or other person subject to this chapter;

    (11)  Accept and rely on investigation or examination reports made by other government officials in Hawaii or another state;

    (12)  Accept and cite in examination reports, investigation reports, or any other writings of the commissioner any audit reports made by an independent certified public accountant for the digital asset company or other person subject to this chapter; provided that the audit and the commissioner's examination or investigation relate to the same general subject matter; and

    (13)  Enter into agreements with or hire, retain, or contract with private and governmental entities to develop educational programs relating to digital assets.

PART II.  CHARTERS

     §   -4  Charter required.  (a)  No person shall engage in digital asset business activities or hold itself out as able to engage in digital asset business activities with or on behalf of another person unless the person is:

     (1)  Chartered in the state pursuant to this chapter; or

     (2)  Exempted from the charter requirement under section    -2.

     (b)  Any transaction made in violation of this section shall be void, and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the void transaction.

     §   -5  Fees, fines, and penalties; disposition.  (a)  The commissioner may adopt rules specifying charter application and renewal fees, fines, and penalties for violation of this chapter or any rules adopted pursuant to this chapter, or any other charges necessary to implement this chapter.

     (b)  Unless otherwise specified, all fees, fines, penalties, and other charges collected pursuant to this chapter shall be deposited with the director of commerce and consumer affairs to the credit of the compliance resolution fund established pursuant to section 26-9(o).  Payments shall be made through NMLS, to the extent authorized by NMLS.

     §   -6  Charter application.  (a)  Applicants for a digital asset charter shall apply in a form prescribed by the commissioner.  The application form shall include, at a minimum:

     (1)  The legal name, any trade names, and the business address of the applicant and, if the applicant is a partnership, association, limited liability company, limited liability partnership, or corporation, the names and business addresses of each controlling member, officer, principal, or director;

     (2)  The applicant's principal place of business in the United States;

     (3)  The address of any branch offices at which the applicant proposes to engage in digital asset business activities;

     (4)  The identity and background information required by subsection (b); and

     (5)  Any other information required by the commissioner.

     (b)  For purposes of the charter application, the applicant shall provide to the commissioner the following evidence to verify the applicant's identity and background, including, if the applicant is not an individual, the identities and backgrounds of each controlling member, officer, principal, or director:

     (1)  Fingerprints for submission to the Federal Bureau of Investigation or any other governmental agency or entity authorized to receive the fingerprints to conduct a state, national, and international criminal history background check; provided that the applicant shall pay any applicable fees for the criminal history background check; and

     (2)  Legal and financial histories, in a form prescribed by the commissioner, including authorization for the commissioner to obtain:

          (A)  An independent credit report from a consumer reporting agency, as described in section 603(p) of the Fair Credit Reporting Act (15 U.S.C. §1681a(p)); and

          (B)  Information related to any relevant administrative, civil, or criminal findings by any government agency;

provided that the commissioner may use any information obtained pursuant to this section to determine an applicant's financial responsibility, character, and general fitness for the charter.

     (c)  The commissioner may use an agent to request information from, or distribute information to, the United States Department of Justice or any other private or governmental entity for purposes of this chapter.

     (d)  An applicant for a charter pursuant to this chapter shall not be issued the charter unless the applicant is registered with the business registration division of the department to do business in the State.

     (e)  The commissioner, by order or rules adopted pursuant to chapter 91, may waive or modify any requirement of this chapter or establish new requirements to facilitate the review of charter applications.

     §   -7  Issuance of charter; grounds for denial.  (a)  The commissioner shall review each applicant, including, if the applicant is not an individual, each controlling member, officer, principal, or director, to determine the applicant's financial responsibility, character, and general fitness for a charter.  The commissioner shall issue a charter authorizing the applicant to engage in digital asset business activities if the commissioner determines that the applicant or each controlling member, officer, principal, or director:

     (1)  Has not had a digital asset license or charter revoked in any jurisdiction; provided that, if a license or charter was revoked but the revocation was subsequently vacated, it shall not be deemed a revocation for purposes of this chapter;

     (2)  Has not been convicted of, pled guilty or nolo contendere to, or been granted a deferred acceptance of a guilty plea for a felony under federal law, the Uniform Code of Military Justice, or the laws of any state or country:

          (A)  During the seven years preceding the date of the application for a charter; or

          (B)  For a felony involving an act of fraud, dishonesty, breach of trust, or money laundering, at any time preceding the date of the application;

     (3)  Has demonstrated sufficient financial responsibility, good character, and general fitness to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly, and efficiently, pursuant to this chapter; provided that, for purposes of this paragraph, the commissioner may find an applicant not financially responsible based on:

          (A)  Outstanding financial judgments, except judgments resulting solely from outstanding medical expenses;

          (B)  Outstanding tax liens or other government liens;

          (C)  Foreclosures in the preceding three years; or

          (D)  A pattern of seriously delinquent accounts in the preceding three years;

     (4)  Has not been convicted of, pled guilty or nolo contendere to, or been granted a deferred acceptance of a guilty plea for a misdemeanor involving an act of fraud, dishonesty, breach of trust, or money laundering under federal law, the Uniform Code of Military Justice, or the laws of any state or country;

     (5)  Has satisfied the requirements of this chapter, except any requirements waived or modified by the commissioner pursuant to section    -6(e); and

     (6)  Has paid the bond required by section    -10, if applicable.

     (b)  The applicant, including each controlling member, officer, principal, or director, shall authorize the commissioner to conduct background checks in each state in which the person has conducted digital asset business activities to verify the information provided pursuant to subsection (a).  The authorization shall include consent to provide additional fingerprints, if needed, to law enforcement or regulatory bodies in other states.

     (c)  A charter shall not be issued to any applicant:

     (1)  Whose charter or license to conduct digital asset business activities was suspended or revoked in the five years preceding the application by an authority in this State or any other state or jurisdiction;

     (2)  Who has advertised to consumers or conducted transactions in the State in violation of this chapter; or

     (3)  Who has failed to submit a completed application for charter.

     (d)  A charter issued pursuant to this chapter shall remain in effect until surrendered, suspended, or revoked, or until the charter expires for failure to pay the annual charter renewal fee required by section    -10.

     §   -8  Anti-money laundering program.  (a)  Each digital asset company shall conduct an initial risk assessment that considers the legal, compliance, financial, and reputational risks associated with the company's activities, services, customers, counterparties, and geographic location.

     (b)  Based on the initial risk assessment, each digital asset company shall establish and maintain:

     (1)  An anti-money laundering program that complies with the Anti-Money Laundering Act of 2020;

     (2)  An effective customer due diligence system and monitoring program;

     (3)  Procedures for regularly screening customers against the Specially Designated Nationals and Blocked Persons lists maintained by the Office of Foreign Assets Control and any other government watchlists;

     (4)  Recordkeeping procedures for tracking any cash purchases or transactions and procedures for reporting the cash purchases or transactions to the appropriate federal regulatory agency, as required by the Anti‑Money Laundering Act of 2020;

     (5)  Procedures for monitoring and reporting any suspicious activities; and

     (6)  Policies and procedures for rejecting or blocking any transactions that violate state or federal law.

     (c)  Each digital asset company shall conduct the risk assessment required by subsection (a) annually, or more frequently to address a known risk, and shall modify the company's programs and policies as needed to comply with subsection (b).

     (d)  For the purposes of this section, "customer due diligence" means the process of verifying a customer's identity and assessing the risk associated with the customer to prevent financial crimes like money laundering.

     §   -9  Cybersecurity program.  (a)  Each digital asset company shall establish and maintain a cybersecurity program to ensure the availability and functionality of the digital asset company's electronic systems and to protect the systems from unauthorized access, use, or tampering.  The cybersecurity program shall enable the digital asset company to:

     (1)  Identify internal and external cybersecurity risks by, at a minimum, identifying the information stored on the digital asset company's systems, the sensitivity of the information, and how and by whom the information may be accessed;

     (2)  Protect the digital asset company's electronic systems and the information stored on the systems from unauthorized access, use, or other malicious acts through the use of defensive infrastructure and the implementation of policies and procedures;

     (3)  Detect system intrusions, data breaches, unauthorized access to systems or information, malware, and other cybersecurity events;

     (4)  Respond to detected cybersecurity events to mitigate any negative effects; and

     (5)  Recover from cybersecurity events and restore normal operations and services.

     (b)  Each digital asset company shall implement a written cybersecurity policy setting forth the digital asset company's policies and procedures for the protection of its electronic systems and any customer or counterparty data stored on the company's systems.  The written policy shall be reviewed and approved at least annually by the digital asset company's board of directors or the equivalent governing body.  The written cybersecurity policy shall:

     (1)  Establish policies, procedures, and controls in compliance with subsection (a);

     (2)  Designate a cybersecurity officer;

     (3)  Require the development and implementation of employee training to educate employees on new and emerging cybersecurity risks and threats, to the extent appropriate for each employee's position and responsibilities;

     (4)  Establish methods for testing the digital asset company's cybersecurity systems; and

     (5)  Establish recordkeeping policies.

     §   -10  Fees; bond.  (a)  A digital asset company shall pay the following fees to the division through NMLS to obtain and maintain a valid charter under this chapter:

     (1)  An initial nonrefundable application fee of $9,000;

     (2)  An annual, nonrefundable renewal application fee of $1,000; and

     (3)  Any fees collected by NMLS for the processing of the application, including any applicable fees for:

          (A)  A criminal history background check of the applicant, including each of the applicant's control persons, executive officers, directors, general partners, and managing members, for submission to the Federal Bureau of Investigation or any governmental agency or entity authorized to receive fingerprints for a state, national, and international criminal history background check; and

          (B)  An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act (15 U.S.C. §1681a(p)).

     (b)  Each digital asset company shall also be assessed quarterly fees based on the total value of the company's transactions in the State, measured by the United States dollar equivalent of the digital assets, as recorded in the company's quarterly reports.  The first quarterly fees shall be assessed in the quarter after the applicant obtains a charter, in accordance with the following:

     (1)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is not more than $10,000, the quarterly assessment shall be $2,500;

     (2)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $10,000 but not more than $15,000, the quarterly assessment shall be $3,750;

     (3)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $15,000 but not more than $25,000, the quarterly assessment shall be $6,250;

     (4)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $25,000 but not more than $35,000, the quarterly assessment shall be $8,750; and

     (5)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $35,000, the quarterly assessment shall be $12,500.

     (c)  The assessments shall be paid quarterly on February 15, May 15, August 15, and November 15 of each year, based on the digital asset company's quarterly reports as of the previous December 31, March 31, June 30, and September 30, respectively.

     (d)  Digital assets shall be based on the United States dollar equivalent of the digital assets held on behalf of customers, calculated from the company's quarterly report based on the trading price of the asset on the digital asset company's platform as of 4:30 p.m. Hawaii-Aleutian Standard Time.

     (e)  If required by the commissioner, the applicant or digital asset company shall file and maintain a surety bond that is approved by the commissioner and executed by the applicant as obligor and by a surety company authorized to operate as a surety in the State.  The surety company's liability as a surety shall not exceed, in the aggregate, the penal sum of the bond; provided that the penal sum of the bond shall be not less than $500,000, based on the annual United States dollar equivalent of the digital asset as reported in the charter application or annual renewal report.

     (f)  The bond required by subsection (e) shall run to the State as obligee for the use and benefit of the State and of any person or persons that may have a cause of action against the digital asset company as obligor under this chapter.  The bond shall be conditioned upon the following:

     (1)  The digital asset company as obligor shall faithfully conform to and abide by this chapter and all rules adopted under this chapter; and

     (2)  The bond shall pay to the State and any person or persons having a cause of action against the digital asset company as obligor any moneys that may become due and owing to the State or those persons under this chapter.

     §   -11  Renewal of charter; annual report; quarterly reports.  (a)  Each digital asset company shall file an annual report in accordance with NMLS policy.  The annual report shall include the digital asset company's most recent audited annual financial statement, including:

     (1)  Balance sheets;

     (2)  A statement of income or loss;

     (3)  A statement of changes in shareholders' equity; and

     (4)  A statement of cash flows;

provided that, if the digital asset company is a wholly owned subsidiary of another corporation, the digital asset company shall submit the consolidated audited annual financial statement of the parent company in lieu of the digital asset company's annual audited financial statement.

     (b)  Each digital asset company shall file quarterly reports, in a form prescribed by the commissioner, that shall include:

     (1)  An accounting of the digital asset company's activities in the State since the prior reporting period, including:

          (A)  The number of stored value accounts opened;

          (B)  The number of transactions processed;

          (C)  The total value of transactions, measured by the United States dollar equivalent of the digital assets;

          (D)  The number of system outages;

          (E)  A chart of accounts, including a description of each account; and

          (F)  Any other information relating to performance metrics or the efficacy of the company, as required by the commissioner;

     (2)  A report of any material changes to any of the information submitted by the digital asset company in the company's original application that has not previously been reported to the commissioner in any other report required under this chapter;

     (3)  Disclosure of any pending or final suspension, revocation, or other enforcement action by any state or government authority; and

     (4)  Any other information required by the commissioner.

     (c)  A digital asset company may renew its charter by:

     (1)  Continuing to meet the requirements of this chapter;

     (2)  Filing a completed renewal application in a form prescribed by NMLS or the commissioner; and

     (3)  Paying a renewal fee.

     (d)  If, at the time the charter renewal is due, the digital asset company has not:

     (1)  Filed an application deemed complete by the commissioner;

     (2)  Filed an annual report and all quarterly reports; or

     (3)  Paid the quarterly fees,

the digital asset company's charter shall be suspended as of the date the renewal is due, unless the company is granted an extension of time by the commissioner.  The digital asset company shall have thirty days after the company's charter is suspended to file the missing documents or to pay the outstanding fees, plus a late filing fee of $250 for each day after suspension that the documents and fees are not made current.  The commissioner, for good cause, may reduce or suspend the late filing fee.

     §   -12  Principal place of business.  (a)  Each digital asset company shall maintain a principal place of business in the United States, regardless of whether the digital asset company maintains its principal office outside the United States.

     (b)  The digital asset company's principal place of business shall be identified in NMLS.

     §   -13  Sale or transfer of charter; change of control.  (a)  No charter granted to a digital asset company shall be transferred, except as provided in this section.

     (b)  A person or group of persons proposing a change of control of a digital asset company shall submit to the commissioner an application requesting approval of the proposed change of control, accompanied by a nonrefundable application fee of $10,000.

     (c)  After reviewing the application submitted pursuant to subsection (b), the commissioner may require the digital asset company or the person or group of persons requesting a change of control, or both, to provide additional information concerning the persons who propose to assume control of the digital asset company.  The additional information shall be limited to the types of information required of a digital asset company as part of its original charter or renewal application.  The information shall include, for the five-year period immediately preceding the date of the application for change of control, a history of any material litigation and any criminal convictions of each person who, upon approval of the application for change of control, would be a principal of the digital asset company.  Authorization shall be given to conduct criminal history record checks of these persons, accompanied by payment of the applicable fee for each record check.

     (d)  The commissioner shall approve an application requesting a change of control under subsections (b) and (c) if the commissioner determines that the person or group of persons requesting approval has the competence, experience, character, and general fitness to control the digital asset company in a lawful and proper manner and that the interests of the public will not be jeopardized by the change of control.

     (e)  A person who:

     (1)  Acts as a proxy for the sole purpose of voting at a designated meeting of the security holders or holders of voting interests in a digital asset company or person in control of a digital asset company;

     (2)  Acquires control of a digital asset company by devise or descent;

     (3)  Acquires control as a personal representative, custodian, guardian, conservator, trustee, or as an officer appointed by a court of competent jurisdiction or by operation of law; or

     (4)  Is exempted by the commissioner,

shall be exempt from the requirements of this section; provided that the digital asset company shall notify the commissioner when control is assumed by the person.

     (f)  Before filing an application requesting the commissioner's approval of a change of control, a person may request, in writing, a determination from the commissioner as to whether the person would be considered a person in control of a digital asset company upon consummation of a proposed transaction.  If the commissioner determines that the person would not be a person in control of a digital asset company, the commissioner shall enter an order to that effect, and the proposed person and transaction shall not be subject to subsections (b) through (d).

     (g)  Subsection (b) shall not apply to public offerings of securities.

     §   -14  Ownership and control of a digital asset.  (a)  To the extent a digital asset company stores, holds, or maintains custody or control of a digital asset on behalf of another person, the digital asset company shall hold a digital asset of the same type and amount as that which is owed or obligated to that person.

     (b)  If a digital asset company violates subsection (a), the property interest the person holds in the digital asset shall be a pro rata property interest in the type of digital asset for which the person is entitled, without regard to the time the person became entitled to the digital asset or the digital asset company obtained control of the digital asset.

     (c)  The digital asset referred to in this section shall:

     (1)  Be held for the person or persons entitled to the digital asset;

     (2)  Not be considered the property of the digital asset company; and

     (3)  Not be subject to the claims of creditors of the digital asset company.

     (d)  No digital asset company shall sell, transfer, assign, lend, hypothecate, pledge, or otherwise use or encumber assets, including digital assets, stored, held, or maintained by, or under the custody or control of, the digital asset company on behalf of another person, except at the direction of that person, unless it is clearly explained to the person that the use or encumberment is the intent of the product.

PART III.  DISCLOSURES, ADVERTISING, AND RECORDKEEPING

     §   -15  Required disclosures.  (a)  A digital asset company that engages in digital asset business activities shall provide to each person using the digital asset company's products or services the disclosures required by subsection (b) and any additional disclosures the commissioner deems necessary for the protection of the company's customers.  The commissioner shall determine the required time for and form of the disclosure.  Any disclosure required by this section shall be made in writing, unless an alternate disclosure method is approved by the commissioner, and shall be issued separately from any other information provided by the digital asset company.

     (b)  Before doing business with a person, a digital asset company shall disclose to the person, to the extent applicable to the person's intended business activities:

     (1)  The amount and timing of any fees and charges the digital asset company may assess, or how the fees and charges will be calculated if the fees or charges are not established in advance;

     (2)  Whether the product or service provided by the digital asset company is covered by:

          (A)  A form of insurance or is otherwise guaranteed against loss by an agency of the United States, including the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation; or

          (B)  Private insurance against theft or loss, including cyber theft or theft by other means;

     (3)  The irrevocability of a transfer or exchange;

     (4)  The method by which the person can update the person's contact information with the digital asset company;

     (5)  That the date or time that the person initiates instructions to make a transfer or exchange may differ from the date or time when the transfer or exchange is actually completed and the person's account is debited;

     (6)  The person's right to at least thirty days' notice if the digital asset company changes its fee schedule, terms and conditions of its business activities with the person, or other policies applicable to the person's account; and

     (7)  That digital assets are not money.

     (c)  At the end of a digital asset transaction with or on behalf of a person, a digital asset company shall provide to the person, in writing:

     (1)  The name and contact information of the digital asset company, and any information the person may need to ask a question or file a complaint;

     (2)  The type, value, date, precise time, and amount of the transaction; and

     (3)  Any fees charged for the transaction, including any charge for converting a digital asset to money, bank credit, or another digital asset.

     §   -16  Tangible net worth requirement; records.  (a)  A digital asset company engaged in digital asset business activities shall maintain at all times a tangible net worth of at least $500,000, or an amount determined by the commissioner to be necessary to ensure the company's sound operations.

     (b)  Each digital asset company shall create, preserve, and make available for inspection by the commissioner the books, accounts, and other records required by subsection (c) in a form that enables the commissioner to determine whether the digital asset company is in compliance with this chapter, any relevant court order, and other laws of the State.

     (c)  For each digital asset business activity conducted with or on behalf of a person, the digital asset company shall maintain for five years after the date of the activity a record of:

     (1)  Each transaction, including the:

          (A)  Identity and address of the person and, to the extent feasible, the identity and address of any other parties to the transaction;

          (B)  Account number of the person;

          (C)  Form, amount, and date of the transaction; and

          (D)  Any payment instructions given by the person;

     (2)  The aggregate number of transactions and aggregate value of transactions with or on behalf of the person in the previous twelve calendar months, expressed in the United States dollar equivalent of the digital assets;

     (3)  Each transaction with or on behalf of the person in which the digital asset company exchanged one form of digital asset for money or another form of digital asset;

     (4)  A general ledger, posted to at least monthly, that lists all of the digital asset company's assets, liabilities, capital, income, ownership equity, and expenses;

     (5)  Each call report related to the person that the digital asset company is required by law to create or provide to the division or NMLS;

     (6)  The account number and address of each bank the digital asset company used in conducting its digital asset business activity with the person and the bank statements and bank reconciliation records for those accounts;

     (7)  If the person filed a customer complaint, any communications and documentation related to the investigation of the complaint; and

     (8)  A report of any digital asset business activity transaction with or on behalf of the person that the digital asset company was unable to complete.

     §   -17  Advertising and marketing.  (a)  No digital asset company engaged in digital asset business activities shall advertise its products, services, or activities in the State, or advertise to consumers in the State, unless the advertisement includes the name of the company and confirmation that the digital asset company is "Chartered by the State of Hawaii Department of Commerce and Consumer Affairs' Division of Financial Institutions to engage in digital asset business activity."

     (b)  Each digital asset company shall maintain for at least five years from the date of the materials' creation, and make available for examination by the commissioner, all advertising and marketing materials, including advertising or marketing through:

     (1)  Print media, including brochures;

     (2)  Digital media and internet websites;

     (3)  Television and video streaming services;

     (4)  Radio and audio streaming services; and

     (5)  Presentation materials;

provided that if material changes are made to internet or digital advertising or marketing materials, the digital asset company shall maintain screenshots or transcripts reflecting the changes.

     (c)  In all advertising and marketing materials, the digital asset company and any person or entity acting on the company's behalf shall:

     (1)  Comply with all disclosure requirements under state and federal law; and

     (2)  Avoid making, directly or by implication, any false, misleading, or deceptive representations or omissions.

     §   -18  Confidentiality.  (a)  Except as provided in title 12 United States Code section 5111, the following shall continue to apply to information and materials after the information or material has been disclosed to NMLS or any federal or state regulatory officials having authority over transactions under this chapter:

     (1)  Any federal or state law regarding the privacy or confidentiality of information or materials provided to NMLS; and

     (2)  Any privilege arising under federal or state law or the rules of any federal or state court.

     (b)  For the purposes of this section, the commissioner may enter into agreements or sharing arrangements with other governmental agencies, the Conference of State Bank Supervisors, or other associations representing governmental agencies.

     (c)  Information or material that is subject to a privilege or confidentiality under subsection (a) shall not be subject to:

     (1)  Disclosure under chapter 92F; or

     (2)  Subpoena, discovery, or admission into evidence in any private civil action or administrative proceeding, unless:

          (A)  The privilege is determined by NMLS to be inapplicable to the information or material; or

          (B)  The person to whom the information or material pertains waives the privilege.

     (d)  Notwithstanding chapter 92F, investigations and examinations authorized under section    -20 and any related information and documents, including reports of the investigation or examination, shall be confidential and shall not be subject to discovery or disclosure in any civil lawsuit or criminal proceeding.

     (e)  If a conflict exists between this section and any other provision of state law relating to the disclosure of privileged or confidential information or material, this section shall control.

     (f)  This section shall not apply to information or material relating to the employment history of, or any publicly adjudicated disciplinary or enforcement actions against, any persons whose information is publicly accessible in NMLS.

PART IV.  ENFORCEMENT

     §   -19  Enforcement authority; violations; penalties.  (a)  The commissioner may take any disciplinary action specified in subsection (b) against an applicant or digital asset company if the applicant; digital asset company; or any control person, executive officer, director, general partner, or managing member of the applicant or digital asset company has:

     (1)  Violated this chapter or any rule adopted or order issued pursuant to this chapter;

     (2)  Failed to disclose facts or conditions that, had those facts or conditions been known at the time the application for charter was made, would have justified the commissioner in denying the application;

     (3)  Failed to provide within a reasonable time any information required by the commissioner;

     (4)  Failed to provide or maintain proof of financial responsibility;

     (5)  Become insolvent;

     (6)  Made in any document or statement filed with the commissioner a false representation of a material fact or omitted a material fact;

     (7)  Been convicted of or entered a plea of guilty or nolo contendere to a crime involving fraud, deceit, or any similar crime;

     (8)  Failed to make, maintain, or produce records in compliance with this chapter or any rule adopted by the commissioner pursuant to chapter 91;

     (9)  Been the subject of any disciplinary action from a state or federal agency that resulted in the revocation of a license or charter;

    (10)  Had a final judgement entered against the applicant or digital asset company for a violation of:

          (A)  This chapter;

          (B)  Any state or federal law concerning a digital asset license or charter or money transmitter license; or

          (C)  Any state or federal law prohibiting unfair or deceptive acts or practices; or

    (11)  Failed to take, or provide proof of taking, timely corrective action as required by the commissioner after an investigation or examination pursuant to section    -20.

     (b)  If the commissioner finds that an applicant or a digital asset company has committed one or more violations under subsection (a), the commissioner may:

     (1)  Deny an application for a charter or branch office;

     (2)  Suspend or revoke the charter in accordance with section    -23;

     (3)  Order the digital asset company to cease and desist from engaging in any act specified in subsection (a), in accordance with section    -24;

     (4)  Order the digital asset company to refund to customers any excess charges under this chapter; or

     (5)  Impose penalties of up to $20,000 for each violation, in accordance with section    -26.

     (c)  The commissioner may issue a temporary cease and desist order if the commissioner finds that the digital asset company, applicant, or other person subject to this chapter is engaging, has engaged, or is about to engage in an illegal, unauthorized, unsafe, or unsound practice in violation of this chapter.

     (d)  If the commissioner denies or revokes a charter or takes other disciplinary action pursuant to this chapter, the commissioner shall enter an order to that effect and notify the applicant or digital asset company of the denial, revocation, or other disciplinary action by personal service or certified mail to the last known address of the applicant or digital asset company as shown on the application or charter, or as furnished in writing to the commissioner.

     (e)  No revocation, suspension, consent order, or surrender of a charter shall impair or affect the obligations of any preexisting lawful contract between a digital asset company and a consumer.

     (f)  The commissioner may reinstate a charter, terminate a suspension, or grant a charter to a digital asset company or person whose charter has been revoked, suspended, or denied if no fact or condition then exists that would clearly justify the revocation, suspension, or denial.

     (g)  The commissioner may impose on a digital asset company, applicant, or other person subject to this chapter an administrative fine if the commissioner finds, on the record after notice and an opportunity for a hearing, that the digital asset company, applicant, or person has violated or failed to comply with any requirement of this chapter or any rule adopted or order issued under this chapter.

     (h)  Each violation or failure to comply with any directive or order of the commissioner shall be a separate violation.

     §   -20  Investigation and examination; authority.  (a)  In addition to the powers granted to the commissioner under section    -3, the commissioner may conduct investigations and examinations in accordance with this section and, for purposes of an investigation or examination, may:

     (1)  Access, receive, and use any books, accounts, records, files, documents, or information that the commissioner deems relevant to the investigation or examination, regardless of the location, possession, control, or custody of the documents, information, or evidence;

     (2)  Review, investigate, or examine any digital asset company or person subject to this chapter as often as necessary to carry out the purposes of this chapter;

     (3)  Direct, subpoena, or order the attendance of, and examine under oath, any person whose testimony may be required regarding a digital asset transaction, digital asset business activity, or any other subject matter of the investigation or examination; and

     (4)  Direct, subpoena, or order a person to produce books, accounts, records, files, and any other documents the commissioner deems relevant.

     (b)  Each digital asset company or other person subject to this chapter shall provide to the commissioner, upon the commissioner's request, any books or records relating to the company or person's digital asset business activities.  The commissioner shall also be permitted to interview the control persons, executive officers, directors, general partners, managing members, principals, managers, employees, independent contractors, agents, and consumers who may have information about the digital asset company or its digital asset business activities.

     (c)  If directed by the commissioner, each digital asset company or person subject to this chapter shall make or compile reports or prepare other information to support the commissioner's investigation or examination, including:

     (1)  Accounting compilations;

     (2)  Information, lists, or data concerning digital asset transactions in a format prescribed by the commissioner; or

     (3)  Any other information the commissioner deems necessary.

     (d)  In conducting any investigation or examination authorized by this chapter, the commissioner may control access to any documents or records of the digital asset company or person under investigation or examination.  The commissioner may take possession of the documents or records or place a person in exclusive charge of the documents or records.  During the period of control, no person shall remove or attempt to remove any of the documents or records except pursuant to a court order or with the consent of the commissioner; provided that, unless the commissioner has reasonable grounds to believe the records or documents have been, or are at risk of being, altered or destroyed, the commissioner shall give consent for the digital asset company or owner of the documents or records to access the documents or records as necessary to conduct the company's or person's ordinary business affairs.

     (e)  This section shall apply even if a digital asset company or person subject to this chapter acts or claims to act without the State's authority.

     (f)  No digital asset company or person subject to investigation or examination under this section shall knowingly withhold, abstract, remove, mutilate, destroy, or conceal any relevant books, records, computer records, or other information.

     (g)  For each digital asset company or person investigated or examined under this section, the commissioner may charge an investigation or examination fee, payable to the commissioner, based upon the cost per hour, per examiner, for the investigation or examination.  The hourly fee shall be $60 or an amount established by the commissioner by rule pursuant to chapter 91.  In addition to the investigation or examination fee, the commissioner may charge any digital asset company or person who is investigated or examined pursuant to this section additional fees, payable to the commissioner, for travel, per diem, mileage, or other reasonable expenses incurred in connection with the investigation or examination.

     (h)  Any person having reason to believe that this chapter, or any rules adopted or orders issued under this chapter, have been violated, or that a charter issued under this chapter should be suspended or revoked, may file a written complaint with the commissioner, setting forth the details of the alleged violation or grounds for suspension or revocation.

     §   -21  Prohibited practices.  (a)  Except as otherwise provided by law, no digital asset company, including the company's control persons, executive officers, directors, general partners, managing members, employees, or independent contractors, or any other person subject to this chapter shall, directly or indirectly:

     (1)  Engage in any act that attempts to limit or restrict the application of this chapter;

     (2)  Use a customer's digital asset account number to prepare, issue, or create a transaction on behalf of the customer without the customer's authorization;

     (3)  Charge, collect, or receive any fees for negotiating a digital asset transaction, other than fees authorized by this chapter, rules adopted pursuant to this chapter, or any other applicable state or federal law;

     (4)  Fail to make any disclosures required by this chapter, rules adopted pursuant to this chapter, or any other applicable state or federal law;

     (5)  Employ any scheme, device, or artifice to defraud or mislead any consumer or person;

     (6)  Engage in any unfair or deceptive acts, practices, or advertising in connection with a digital asset business activity;

     (7)  Obtain a digital asset by fraud or misrepresentation;

     (8)  Conduct any digital asset business activity with or on behalf of any person physically located in the State through the use of the Internet, facsimile, telephone, kiosk, or any other means, without first obtaining a charter under this chapter;

     (9)  Make a false or deceptive statement or representation to consumers, including statements regarding rates, fees, financing terms, or any other conditions placed on digital asset business activities;

    (10)  Make a false statement or knowingly omit a material fact in connection with any reports filed with the division or investigation or examination conducted by the division;

    (11)  Conduct digital asset business activities from any location not authorized by the commissioner as a principal place of business or branch office;

    (12)  Draft funds from any depository financial institution without the written approval of the consumer; provided that nothing in this paragraph shall prohibit the conversion of a negotiable instrument into an electronic form for processing through the Automated Clearing House or a similar system;

    (13)  Fail to comply with all applicable state and federal laws controlling the activities governed by this chapter; or

    (14)  Fail to pay any fee, assessment, or moneys due to the department.

     (b)  In addition to any other penalty provided for under this chapter, any digital asset transaction conducted in violation of subsection (a) shall be void and unenforceable.

     §   -22  Voluntary surrender of a charter.  (a)  A digital asset company may voluntarily cease business and surrender the company's charter by giving written notice of the intended surrender to the commissioner through NMLS.

     (b)  Notice to the commissioner shall be provided at least thirty days before the surrender of the charter and shall include:

     (1)  The date of the surrender;

     (2)  The name, address, telephone number, facsimile number, and electronic mail address of a person within the digital asset company having sufficient knowledge and authority to communicate with the commissioner regarding all matters relating to the company;

     (3)  The reason for the surrender;

     (4)  Information relating to the digital asset company's outstanding digital asset transactions in the State, including the:

          (A)  Total dollar amount of the digital asset company's outstanding digital asset transactions;

          (B)  Dollar amount of each outstanding digital asset transaction; and

          (C)  Name, address, and telephone number of each person with whom the digital asset company has an outstanding digital asset transaction;

     (5)  A list of the digital asset company's authorized branch offices, if any;

     (6)  Confirmation that the digital asset company has notified each of its authorized branch offices, if any, that the branch offices shall no longer conduct digital asset business activities on the company's behalf; and

     (7)  Confirmation that the digital asset company has notified each of its digital asset accounts, if any, that the digital asset account is being transferred and has provided contact information for the digital asset company or entity to which the digital asset is being assigned.

     §   -23  Suspension or revocation of a charter.  The commissioner may suspend or revoke a charter if the commissioner finds that:

     (1)  A fact or condition exists that, had it existed when the digital asset company applied for the charter, would have been grounds for denying the digital asset company's application;

     (2)  The digital asset company's tangible net worth has become insufficient and the company, after ten days' written notice from the commissioner, failed to take the steps required by the commissioner to remedy the insufficiency;

     (3)  The digital asset company has knowingly violated any material provision of this chapter or any rule adopted or order issued under this chapter;

     (4)  The digital asset company is conducting, or has conducted, its business in an unsafe or unsound manner;

     (5)  The digital asset company has become insolvent;

     (6)  The digital asset company has suspended payment of its obligations, made an assignment for the benefit of its creditors, or admitted in writing its inability to pay its debts as they become due;

     (7)  The digital asset company has filed for bankruptcy, reorganization, arrangement, or any other relief under federal bankruptcy laws;

     (8)  The digital asset company refuses to permit the commissioner to undertake an investigation or examination that is authorized by this chapter; or

     (9)  The competence, experience, character, or general fitness of the digital asset company indicates that it is no longer in the public interest to allow the company to hold a charter.

     §   -24  Orders to cease and desist.  (a)  The commissioner may issue an order requiring a digital asset company to cease and desist if the commissioner determines that the digital asset company's violation of this chapter, or a rule adopted or order issued under this chapter, is likely to cause:

     (1)  Immediate and irreparable harm to the digital asset company, the digital asset company's customers, or the public; or

     (2)  The insolvency or a significant dissipation of the assets of the digital asset company.

     (b)  An order to cease and desist shall be effective upon the service of the order and shall remain in effect pending the completion of an administrative proceeding pursuant to chapter 91; provided that the digital asset company may petition the circuit court for a judicial order setting aside, limiting, or suspending the order pending the completion of the administrative proceeding.

     (c)  The commissioner shall hold an administrative proceeding no later than twenty calendar days after issuing an order to cease and desist.

     (d)  The commissioner may also apply to the circuit court for a temporary restraining order or other injunctive relief, as necessary, to protect the public interest.

     §   -25  Consent orders.  The commissioner may enter into a consent order with a person at any time to resolve a matter arising under this chapter.  The consent order shall be signed by the person to whom the order is issued, or the person's authorized representative, and shall indicate the person's agreement with the terms of the order.  A consent order may provide that the order does not constitute an admission by the person that this chapter, or a rule adopted or order issued under this chapter, has been violated.

     §   -26  Civil penalties.  (a)  The commissioner may assess a fine against a person who violates this chapter, or a rule adopted or order issued under this chapter, in an amount not to exceed $10,000 per violation, plus the State's costs and expenses for investigating and litigating the matter, including reasonable attorneys' fees.

     (b)  Any violation of this chapter that is directed toward, targets, or injures an elder may be subject to an additional civil penalty of not more than $10,000 per violation, in addition to any other fines or penalties assessed for the violation.

     §   -27  Criminal penalties.  (a)  A person who intentionally makes a false statement, misrepresentation, or false certification in a record filed or required to be maintained under this chapter, including a person who makes a false entry or omits a material entry in a record, shall be guilty of a class C felony and shall be subject to a fine of not more than $10,000.

     (b)  A person who knowingly engages in any activity for which a charter is required under this chapter without holding a charter shall be guilty of a misdemeanor and shall be subject to a fine of not more than $1,000, imprisonment for not more than one year, or both; provided that each day a violation of this chapter exists shall be a separate offense.

     §   -28  Unchartered persons.  (a)  If the commissioner has reason to believe that a person is conducting digital asset business activities without a charter, in violation of section    -4, the commissioner may:

     (1)  Issue an order for the person to show cause why the commissioner should not issue an order to cease and desist;

     (2)  Issue an order to cease and desist pursuant to section    -24; provided that an order to cease and desist shall be effective upon service of the order; provided further that a person who is served with an order to cease and desist for an alleged violation of section    -4 may petition the circuit court for a judicial order setting aside, limiting, or suspending the order pending the completion of an administrative proceeding pursuant to section    -29; or

     (3)  If the public would be irreparably harmed by the person's continued unchartered digital asset business activities, petition the circuit court in the appropriate jurisdiction for the issuance of a temporary restraining order.

     (b)  The commissioner shall hold an administrative proceeding no later than twenty calendar days after issuing an order to cease and desist.

     §   -29  Administrative procedures.  All administrative proceedings under this chapter shall be conducted in accordance with chapter 91.

     §   -30  Hearings.  Except as otherwise provided in this chapter, the commissioner shall not suspend or revoke a charter, issue an order to cease and desist, or assess a civil penalty without providing the digital asset company, applicant, or other person subject to this chapter with notice and an opportunity to be heard.

     §   -31  Division functions.  (a)  The division shall exercise all administrative functions of the State in regulating, supervising, and issuing charters to digital asset companies.

     (b)  The division may adopt rules pursuant to chapter 91 as necessary to effectuate the purposes of this chapter."

     SECTION 3.  Section 489D-4, Hawaii Revised Statutes, is amended by amending the definition of "monetary value" to read as follows:

     ""Monetary value" means a medium of exchange, whether or not redeemable in money[.], except value defined as a digital asset under chapter      ."

     SECTION 4.  Section 846-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Criminal history record checks may be conducted by:

     (1)  The department of health or its designee on operators of adult foster homes for individuals with developmental disabilities or developmental disabilities domiciliary homes and their employees, as provided by section 321-15.2;

     (2)  The department of health or its designee on prospective employees, persons seeking to serve as providers, or subcontractors in positions that place them in direct contact with clients when providing non-witnessed direct mental health or health care services, as provided by section 321-171.5;

     (3)  The department of health or its designee on all applicants for licensure or certification for, operators for, prospective employees, adult volunteers, and all adults, except adults in care, at healthcare facilities as defined in section 321-15.2;

     (4)  The department of education on employees, prospective employees, and teacher trainees in any public school in positions that necessitate close proximity to children, as provided by section 302A-601.5;

     (5)  The counties on employees and prospective employees who may be in positions that place them in close proximity to children in recreation or child care programs and services;

     (6)  The county liquor commissions on applicants for liquor licenses, as provided by section 281-53.5;

     (7)  The county liquor commissions on employees and prospective employees involved in liquor administration, law enforcement, and liquor control investigations;

     (8)  The department of human services on operators and employees of child caring institutions, child placing organizations, and resource family homes, as provided by section 346-17;

     (9)  The department of human services on prospective adoptive parents as established under section 346‑19.7;

    (10)  The department of human services or its designee on applicants to operate child care facilities, household members of the applicant, prospective employees of the applicant, and new employees and household members of the provider after registration or licensure, as provided by section 346-154, and persons subject to section 346-152.5;

    (11)  The department of human services on persons exempt pursuant to section 346-152 to be eligible to provide child care and receive child care subsidies, as provided by section 346-152.5;

    (12)  The department of health on operators and employees of home and community-based case management agencies and operators and other adults, except for adults in care, residing in community care foster family homes, as provided by section 321-15.2;

    (13)  The department of human services on staff members of the Hawaii youth correctional facility, as provided by section 352-5.5;

    (14)  The department of human services on employees, prospective employees, and volunteers of contracted providers and subcontractors in positions that place them in close proximity to youth when providing services on behalf of the office of youth services or the Hawaii youth correctional facility, as provided by section 352D-4.3;

    (15)  The judiciary on employees and applicants at detention and shelter facilities, as provided by section 571-34;

    (16)  The department of corrections and rehabilitation on employees and prospective employees, volunteers, contract service providers, and subcontract service providers who are directly involved with the treatment and care of, or directly involved in providing correctional programs and services to, persons committed to a correctional facility, or placed in close proximity to persons committed when providing services on behalf of the department or the correctional facility, as provided by section 353-1.5, and the department of law enforcement on employees and prospective employees whose duties involve or may involve the exercise of police powers including the power of arrest, as provided by section 353C-5;

    (17)  The board of private detectives and guards on applicants for private detective or private guard licensure, as provided by section 463-9;

    (18)  Private schools and designated organizations on employees and prospective employees who may be in positions that necessitate close proximity to children; provided that private schools and designated organizations receive only indications of the states from which the national criminal history record information was provided pursuant to section 302C-1;

    (19)  The public library system on employees and prospective employees whose positions place them in close proximity to children, as provided by section 302A_‑601.5;

    (20)  The State or any of its branches, political subdivisions, or agencies on applicants and employees holding a position that has the same type of contact with children, vulnerable adults, or persons committed to a correctional facility as other public employees who hold positions that are authorized by law to require criminal history record checks as a condition of employment, as provided by section 78-2.7;

    (21)  The department of health on licensed adult day care center operators, employees, new employees, subcontracted service providers and their employees, and adult volunteers, as provided by section 321-15.2;

    (22)  The department of human services on purchase of service contracted and subcontracted service providers and their employees and volunteers, as provided by sections 346-2.5 and 346-97;

    (23)  The department of human services on foster grandparent program, senior companion program, and respite companion program participants, as provided by section 346-97;

    (24)  The department of human services on contracted and subcontracted service providers and their current and prospective employees that provide home and community‑based services under section 1915(c) of the Social Security Act, title 42 United States Code section 1396n(c), or under any other applicable section or sections of the Social Security Act for the purposes of providing home and community-based services, as provided by section 346-97;

    (25)  The department of commerce and consumer affairs on proposed directors and executive officers of a bank, savings bank, savings and loan association, trust company, and depository financial services loan company, as provided by section 412:3-201;

    (26)  The department of commerce and consumer affairs on proposed directors and executive officers of a nondepository financial services loan company, as provided by section 412:3-301;

    (27)  The department of commerce and consumer affairs on the original chartering applicants and proposed executive officers of a credit union, as provided by section 412:10-103;

    (28)  The department of commerce and consumer affairs on:

          (A)  Each principal of every non-corporate applicant for a money transmitter license;

          (B)  Each person who upon approval of an application by a corporate applicant for a money transmitter license will be a principal of the licensee; and

          (C)  Each person who upon approval of an application requesting approval of a proposed change in control of licensee will be a principal of the licensee,

          as provided by sections 489D-9 and 489D-15;

    (29)  The department of commerce and consumer affairs on applicants for licensure and persons licensed under title 24;

    (30)  The Hawaii health systems corporation on:

          (A)  Employees;

          (B)  Applicants seeking employment;

          (C)  Current or prospective members of the corporation board or regional system board; or

          (D)  Current or prospective volunteers, providers, or contractors,

          in any of the corporation's health facilities, as provided by section 323F-5.5;

    (31)  The department of commerce and consumer affairs on:

          (A)  An applicant for a mortgage loan originator license, or license renewal; and

          (B)  Each control person, executive officer, director, general partner, and managing member of an applicant for a mortgage loan originator company license or license renewal,

          as provided by chapter 454F;

    (32)  The state public charter school commission or public charter schools on employees, teacher trainees, prospective employees, and prospective teacher trainees in any public charter school for any position that places them in close proximity to children, as provided in section 302D-33;

    (33)  The counties on prospective employees who work with children, vulnerable adults, or senior citizens in community-based programs;

    (34)  The counties on prospective employees for fire department positions that involve contact with children or vulnerable adults;

    (35)  The counties on prospective employees for emergency medical services positions that involve contact with children or vulnerable adults;

    (36)  The counties on prospective employees for emergency management positions and community volunteers whose responsibilities involve planning and executing homeland security measures including viewing, handling, and engaging in law enforcement or classified meetings and assisting vulnerable citizens during emergencies or crises;

    (37)  The State and counties on employees, prospective employees, volunteers, and contractors whose position responsibilities require unescorted access to secured areas and equipment related to a traffic management center;

    (38)  The State and counties on employees and prospective employees whose positions involve the handling or use of firearms for other than law enforcement purposes;

    (39)  The State and counties on current and prospective systems analysts and others involved in an agency's information technology operation whose position responsibilities provide them with access to proprietary, confidential, or sensitive information;

    (40)  The department of commerce and consumer affairs on:

          (A)  Applicants for real estate appraiser licensure or certification, as provided by chapter 466K;

          (B)  Each person who owns more than ten per cent of an appraisal management company who is applying for registration as an appraisal management company, as provided by section 466M-7; and

          (C)  Each of the controlling persons of an applicant for registration as an appraisal management company, as provided by section 466M-7;

    (41)  The department of health or its designee on:

          (A)  Individual applicants or individuals acting on behalf of applying entities for hemp processor permits, as provided under section 328G-2; and

          (B)  All license applicants, licensees, employees, contractors, and prospective employees of medical cannabis dispensaries, and individuals permitted to enter and remain in medical cannabis dispensary facilities, as provided under sections 329D-15(a)(4) and 329D-16(a)(3);

    (42)  The department of commerce and consumer affairs on applicants for nurse licensure or license renewal, reactivation, or restoration, as provided by sections 457-7, 457-8, 457-8.5, and 457-9;

    (43)  The county police departments on applicants for permits to acquire firearms pursuant to section 134-2, on individuals registering their firearms pursuant to section 134-3, and on applicants for new or renewed licenses to carry a pistol or revolver and ammunition pursuant to section 134-9;

    (44)  The department of commerce and consumer affairs on:

          (A)  Each of the controlling persons of the applicant for licensure as an escrow depository, and each of the officers, directors, and principals who will be in charge of the escrow depository's activities upon licensure; and

          (B)  Each of the controlling persons of an applicant for proposed change in control of an escrow depository licensee, and each of the officers, directors, and principals who will be in charge of the licensee's activities upon approval of the application,

          as provided by chapter 449;

    (45)  The department of taxation on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 231-1.6;

    (46)  The department of labor and industrial relations on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 383-110;

    (47)  The department of human services on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, and on current or prospective employees, volunteers, contractors, or contractors' employees or volunteers, subcontractors, or subcontractors' employees or volunteers, whose position places or would place them in close proximity to minors, young adults, or vulnerable adults, as provided by section 346-2.5;

    (48)  The child support enforcement agency on current or prospective employees, or contractors who have access to federal tax information to comply with federal law, regulation, or procedure, as provided by section 576D‑11.5;

    (49)  The department of the attorney general on current or prospective employees, contractors, [contractor's] contractors' employees, or subcontractors who have access to federal tax information to comply with federal law, regulation, or procedure, as provided by section 28‑17;

    (50)  The department of commerce and consumer affairs on each control person, executive officer, director, general partner, and managing member of an installment loan licensee, or an applicant for an installment loan license, as provided in chapter 480J;

    (51)  The department of commerce and consumer affairs on each person, control person, executive officer, director, general partner, and managing member of a digital asset company or applicant for a digital asset charter, as provided in chapter      ;

   [(51)] (52)  The university of Hawaii on current and prospective employees and contractors whose duties include ensuring the security of campus facilities and persons;

   [(52)] (53)  The department of commerce and consumer affairs on applicants for physician licensure or license renewal, through the Interstate Medical Licensure Compact, as provided by section 453B-2; and

   [(53)] (54)  Any other organization, entity, or the State, its branches, political subdivisions, or agencies as may be authorized by state law."

     SECTION 5.  (a)  Notwithstanding any other law to the contrary, a company that participated in the Hawaii digital currency innovation lab operated by the department of commerce and consumer affairs and Hawaii technology development corporation may continue conducting digital asset business activities until six months after the company's completed application for a charter is submitted pursuant to chapter      , Hawaii Revised Statutes, or until the commissioner of financial institutions approves or denies the application, whichever occurs first; provided that the company shall submit a completed application for a charter no later than March 1, 2027; provided further that the commissioner, for good cause, may reduce or extend the six-month period.

     (b)  The submission of an application for charter shall be evidenced through the Nationwide Multistate Licensing System and Registry developed and maintained by the Conference of State Bank Supervisors.

     SECTION 6.  There is appropriated out of the compliance resolution fund the sum of $500,000 or so much thereof as may be necessary for fiscal year 2026-2027 to establish and implement a digital asset charter program pursuant to section 2 of this Act.

     The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2050; provided that the digital asset charter requirements established by section 2 of this Act shall take effect on January 1, 2027; provided further that the amendments made to section 846-2.7, Hawaii Revised Statutes, by section 4 of this Act shall not be repealed when that section is repealed and reenacted pursuant to Act 110, Session Laws of Hawaii 2024.

 

 

 

Report Title:

DCCA; DFI; Digital Asset Companies; Digital Asset Charter; Appropriation

 

Description:

Establishes within the Department of Commerce and Consumer Affairs' Division of Financial Institutions, beginning 1/1/2027, a digital asset charter program for licensing, regulating, and overseeing digital asset companies and digital asset business activities.  Authorizes companies that participated in the Hawaii Digital Currency Innovation Lab to temporarily continue digital asset business activities without a charter in certain circumstances.  Appropriates moneys from the compliance resolution fund.  Effective 7/1/2050.  (SD2)

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

 

 

THE SENATE	S.B. NO.	2757
THIRTY-THIRD LEGISLATURE, 2026		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

 

 

RELATING TO DIGITAL ASSET CHARTERS.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that the use and trading of digital assets, including cryptocurrencies, e-money, network money, e-cash, and other forms of digital currencies, are growing in global popularity.  Digital assets have value but may be recorded in decentralized ledgers or company databases and do not have a physical form like bank notes or coins.  Most digital assets are not issued by government bodies and are not considered legal tender.  Although some states treat digital assets as falling within the states' money transmitter laws, the industry is largely unregulated in the United States.

     The legislature further finds that in 2020, the Hawaii technology development corporation partnered with the department of commerce and consumer affairs' division of financial institutions to conduct a pilot project on digital currencies.  The pilot project included the establishment of the Hawaii digital currency innovation lab to study the landscape of digital currency activities within the State.  The pilot project's findings indicated that digital asset companies do not require a State‑issued money transmitter license to conduct business in Hawaii.  Although some federal regulations apply to digital asset activities, the lack of state regulation may place consumers at risk of fraud and financial abuse.  The legislature believes that the pilot project's findings, and the financial risks to consumers, support the need for a new state regulatory framework for digital asset companies and digital asset activities.

     Accordingly, the purpose of this Act is to:

     (1)  Establish a digital asset charter program to license, regulate, and oversee digital asset companies and digital asset business activities; and

     (2)  Authorize any company that participated in the Hawaii digital currency innovation lab to temporarily continue conducting digital asset business activities without a charter, in certain circumstances.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

digital asset CHARTERS

PART i.  GENERAL PROVISIONS

     §   -1  Definitions.  As used in this chapter:

     "Charter" means the digital asset licensure required under this chapter.

     "Commissioner" means the commissioner of financial institutions for the department of commerce and consumer affairs.

     "Consumer" means a natural person who engages in a digital asset transaction primarily for personal, family, or household purposes.

     "Control over a digital asset" means the power to execute unilaterally or prevent indefinitely a digital asset transaction.

     "Control person" means a person that directly or indirectly exercises control over a digital asset.

     "Department" means the department of commerce and consumer affairs.

     "Digital asset" means an electronically stored unit of value that can be owned, transferred, or traded.  "Digital asset" includes a digital representation of value that:

     (1)  Has a centralized depository or administrator, including stablecoins;

     (2)  Is decentralized and has no centralized depository or administrator; or

     (3)  Is created or obtained by a computing or manufacturing effort.

     "Digital asset" does not include a digital representation of value that cannot be converted into, or redeemed for, currency or another digital asset but is:

     (1)  Used solely within an online gaming platform;

     (2)  Redeemable for goods, services, discounts, or purchases as part of a customer affinity or rewards program offered by the issuer or another designated merchant; or

     (3)  Accessed via a prepaid card.

     "Digital asset administration" means the issuance of a digital asset with the authority to redeem the digital asset for money, bank credit, or another digital asset.

     "Digital asset business activity" means business activities that involve:

     (1)  Exchanging, transferring, or storing a digital asset or engaging in digital asset administration, whether directly or through an agreement with a digital asset control-services vendor;

     (2)  Exchanging one or more digital representations of value used within an online game, gaming platform, or family of games for moneys or bank credit outside that online game, gaming platform, or family of games, if the moneys or bank credit are offered by or on behalf of the same publisher from which the original digital representation of value was received;

     (3)  Storing, holding, or maintaining custody or control of a digital asset on behalf of another person; or

     (4)  Buying or selling a digital asset as a business; performing exchange services as a business; or controlling, administering, or issuing a digital asset.

     "Digital asset company" means a person or company holding a charter under this chapter to engage in digital asset business activities.

     "Digital asset control-services vendor" means a person that has control of a digital asset owned by a third party, under an agreement with another person.

     "Division" means the division of financial institutions of the department of commerce and consumer affairs.

     "Elder" means a person who is sixty-two years of age or older.

     "Examination" means a scheduled review by the division, not requiring a prior complaint, to verify that the digital asset company is operating within the law.

     "Exchange" means the conversion of:

     (1)  Fiat currency or another asset of value into a digital asset;

     (2)  A digital asset into fiat currency or another asset of value; or

     (3)  One form of digital asset into another form of digital asset.

     "Fiat currency" means a government-issued currency that is not backed by a physical commodity, such as gold or silver.

     "Investigation" means a review by the division based on a prior complaint or a report indicating that the digital asset company is not operating within the law or is experiencing financial or other difficulties.

     "NMLS" has the same meaning as defined in section 454F-1.

     "Person" means an individual, sole proprietorship, partnership, corporation, limited liability company, limited liability partnership, or other association of individuals, however organized.

     "Stablecoin" means a digital asset designed to maintain a stable value by being:

     (1)  Attached to a traditional currency like the United States dollar or an exchange-traded commodity; or

     (2)  Backed by reserves to reduce price volatility.

     "Stored value" means a monetary value that is evidenced by an electronic record.

     "Tangible net worth" means total assets, excluding intangible assets, less total liabilities, in accordance with generally accepted accounting principles of the United States.

     "Transfer" means to assume control of a digital asset from or on behalf of another person and to:

     (1)  Credit the digital asset to the account of another person;

     (2)  Move the digital asset from one account to another account belonging to the same person; or

     (3)  Relinquish control of a digital asset to another person.

     "United States dollar equivalent of the digital asset" means the equivalent value of the digital asset in United States dollars on a specific date or during a specified period, as determined by a United States-based digital asset exchange.

     §   -2  Exemptions.  This chapter shall not apply to:

     (1)  The exchange, transfer, or storage of a digital asset, or to digital asset administration, to the extent regulated by the Securities Exchange Act of 1934, as amended (15 U.S.C. 2B, et seq.), or the Commodity Exchange Act of 1936, as amended (7 U.S.C. 1, et seq.);

     (2)  Activity by a person that only:

          (A)  Contributes connectivity software or computing power to a:

               (i)  Decentralized digital asset; or

              (ii)  Protocol governing the transfer of the digital asset;

          (B)  Provides data storage or security services for a business engaged in digital asset business activities but does not otherwise engage in digital asset business activities on behalf of another person; or

          (C)  Provides to a person that is otherwise exempt from this chapter a digital asset as an enterprise solution used solely between the two parties; provided that the person has no agreement or relationship with the end user of the digital asset;

     (3)  A person using a digital asset, including creating, investing, buying, selling, or obtaining the digital asset, as payment for the purchase or sale of goods or services solely for academic purposes;

     (4)  A person whose annual digital asset business activity with, or on behalf of, other persons is reasonably expected to be valued, in the aggregate, at $5,000 or less, measured by the United States dollar equivalent of the digital asset;

     (5)  An attorney who provides escrow services to a person;

     (6)  A securities intermediary, as defined in section 490:8-102, or commodity intermediary, as defined in section 490:9-102;

     (7)  A digital asset control-services vendor;

     (8)  A person that:

          (A)  Does not receive compensation from another person for:

               (i)  Providing a digital asset product or service; or

              (ii)  Conducting digital asset business activities; or

          (B)  Is engaged in testing products or services with the person's own funds or digital assets;

     (9)  Non-custodial digital asset business activities by a person using a digital asset that has been:

          (A)  Acknowledged as legal tender by the United States or a government recognized by the United States; or

          (B)  Determined not to be a security by a United States regulatory agency;

    (10)  Banks, bank holding companies, credit unions, savings banks, financial services loan companies, or mutual banks organized under the laws of the United States or any state; or

    (11)  Any other person or class of persons that the commissioner declares exempt from this chapter.

     §   -3  Powers of commissioner.  In addition to any other powers provided by law, the commissioner may:

     (1)  Adopt rules pursuant to chapter 91 as necessary for the administration of this chapter;

     (2)  Issue declaratory rulings or informal, nonbinding interpretations of this chapter;

     (3)  Investigate and conduct hearings regarding any violation of this chapter or any rule, order, or agreement adopted under this chapter;

     (4)  Create fact-finding committees to make recommendations to the commissioner and to support the commissioner's deliberations;

     (5)  Require a charter applicant or any of the applicant's control persons, executive officers, directors, general partners, or managing members, to disclose any relevant criminal history and request a criminal history record check to be conducted pursuant to chapter 846; provided that the applicant shall pay all applicable fees for each criminal history record check;

     (6)  Contract with or employ qualified persons who may be exempt from chapter 76, including accountants, attorneys, investigators, examiners, auditors, or other professionals, to assist the commissioner in exercising the commissioner's powers and duties;

     (7)  Process and investigate complaints, subpoena witnesses and documents, administer oaths, receive affidavits and oral testimony, conduct contested case proceedings under chapter 91, and take other actions as necessary to exercise the commissioner's powers and duties under this chapter;

     (8)  Require each digital asset company to comply, to the same extent and in the same manner as a bank chartered by the State, with:

          (A)  Any rule, guidance, guideline, statement, supervisory policy, or any similar proclamation issued or adopted by the Federal Deposit Insurance Corporation; and

          (B)  Any policy of the Conference of State Bank Supervisors;

     (9)  Enter into agreements or relationships with other government officials or regulatory associations to improve efficiencies and reduce regulatory burden by sharing resources; standardized or uniform methods or procedures; and documents, records, information, or evidence obtained under this chapter;

    (10)  Use, hire, contract, or employ publicly or privately available analytical systems, methods, or software to investigate or examine a digital asset company or other person subject to this chapter;

    (11)  Accept and rely on investigation or examination reports made by other government officials in Hawaii or another state;

    (12)  Accept and cite in examination reports, investigation reports, or any other writings of the commissioner any  audit reports made by an independent certified public accountant for the digital asset company or other person subject to this chapter; provided that the audit and the commissioner's examination or investigation relate to the same general subject matter; and

    (13)  Enter into agreements with or hire, retain, or contract with private and governmental entities to develop educational programs relating to digital assets.

PART II.  CHARTERS

     §   -4  Charter required.  (a)  No person shall engage in digital asset business activities or hold itself out as able to engage in digital asset business activities with or on behalf of another person unless the person is:

     (1)  Chartered in the state pursuant to this chapter; or

     (2)  Exempted from the charter requirement under section     -2.

     (b)  Any transaction made in violation of this section shall be void, and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the void transaction.

     §   -5  Fees, fines, and penalties; disposition.  (a)  The commissioner may adopt rules specifying charter application and renewal fees, fines, and penalties for violation of this chapter or any rules adopted pursuant to this chapter, or any other charges necessary to implement this chapter.

     (b)  Unless otherwise specified, all fees, fines, penalties, and other charges collected pursuant to this chapter shall be deposited with the director of commerce and consumer affairs to the credit of the compliance resolution fund established pursuant to section 26-9(o).  Payments shall be made through NMLS, to the extent authorized by NMLS.

     §   -6  Charter application.  (a)  Applicants for a digital asset charter shall apply in a form prescribed by the commissioner.  The application form shall include, at a minimum:

     (1)  The legal name, any trade names, and the business address of the applicant and, if the applicant is a partnership, association, limited liability company, limited liability partnership, or corporation, the names and business addresses of each controlling member, officer, principal, or director;

     (2)  The applicant's principal place of business in the United States;

     (3)  The address of any branch offices at which the applicant proposes to engage in digital asset business activities;

     (4)  The identity and background information required by subsection (b); and

     (5)  Any other information required by the commissioner.

     (b)  For purposes of the charter application, the applicant shall provide to the commissioner the following evidence to verify the applicant's identity and background, including, if the applicant is not an individual, the identities and backgrounds of each controlling member, officer, principal, or director:

     (1)  Fingerprints for submission to the Federal Bureau of Investigation or any other governmental agency or entity authorized to receive the fingerprints to conduct a state, national, and international criminal history background check; provided that the applicant shall pay any applicable fees for the criminal history background check; and

     (2)  Legal and financial histories, in a form prescribed by the commissioner, including authorization for the commissioner to obtain:

          (A)  An independent credit report from a consumer reporting agency, as described in section 603(p) of the Fair Credit Reporting Act (15 U.S.C. §1681a(p)); and

          (B)  Information related to any relevant administrative, civil, or criminal findings by any government agency;

provided that the commissioner may use any information obtained pursuant to this section to determine an applicant's financial responsibility, character, and general fitness for the charter.

     (c)  The commissioner may use an agent to request information from, or distribute information to, the United States Department of Justice or any other private or governmental entity for purposes of this chapter.

     (d)  An applicant for a charter pursuant to this chapter shall not be issued the charter unless the applicant is registered with the business registration division of the department to do business in the State.

     (e)  The commissioner, by order or rules adopted pursuant to chapter 91, may waive or modify any requirement of this chapter or establish new requirements to facilitate the review of charter applications.

     §   -7  Issuance of charter; grounds for denial.  (a)  The commissioner shall review each applicant, including, if the applicant is not an individual, each controlling member, officer, principal, or director, to determine the applicant's financial responsibility, character, and general fitness for a charter.  The commissioner shall issue a charter authorizing the applicant to engage in digital asset business activities if the commissioner determines that the applicant or each controlling member, officer, principal, or director:

     (1)  Has not had a digital asset license or charter revoked in any jurisdiction; provided that, if a license or charter was revoked but the revocation was subsequently vacated, it shall not be deemed a revocation for purposes of this chapter;

     (2)  Has not been convicted of, pled guilty or nolo contendere to, or been granted a deferred acceptance of a guilty plea for a felony under federal law, the Uniform Code of Military Justice, or the laws of any state or country:

          (A)  During the seven years preceding the date of the application for a charter; or

          (B)  For a felony involving an act of fraud, dishonesty, breach of trust, or money laundering, at any time preceding the date of the application;

     (3)  Has demonstrated sufficient financial responsibility, good character, and general fitness to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly, and efficiently, pursuant to this chapter; provided that, for purposes of this paragraph, the commissioner may find an applicant not financially responsible based on:

          (A)  Outstanding financial judgments, except judgments resulting solely from outstanding medical expenses;

          (B)  Outstanding tax liens or other government liens;

          (C)  Foreclosures in the preceding three years; or

          (D)  A pattern of seriously delinquent accounts in the preceding three years;

     (4)  Has not been convicted of, pled guilty or nolo contendere to, or been granted a deferred acceptance of a guilty plea for a misdemeanor involving an act of fraud, dishonesty, breach of trust, or money laundering under federal law, the Uniform Code of Military Justice, or the laws of any state or country;

     (5)  Has satisfied the requirements of this chapter, except any requirements waived or modified by the commissioner pursuant to section     -6(e); and

     (6)  Has paid the bond required by section     -10, if applicable.

     (b)  The applicant, including each controlling member, officer, principal, or director, shall authorize the commissioner to conduct background checks in each state in which the person has conducted digital asset business activities to verify the information provided pursuant to subsection (a).  The authorization shall include consent to provide additional fingerprints, if needed, to law enforcement or regulatory bodies in other states.

     (c)  A charter shall not be issued to any applicant:

     (1)  Whose charter or license to conduct digital asset business activities was suspended or revoked in the five years preceding the application by an authority in this State or any other state or jurisdiction;

     (2)  Who has advertised to consumers or conducted transactions in the State in violation of this chapter; or

     (3)  Who has failed to submit a completed application for charter.

     (d)  A charter issued pursuant to this chapter shall remain in effect until surrendered, suspended, or revoked, or until the charter expires for failure to pay the annual charter renewal fee required by section     -10.

     §   -8  Anti-money laundering program.  (a)  Each digital asset company shall conduct an initial risk assessment that considers the legal, compliance, financial, and reputational risks associated with the company's activities, services, customers, counterparties, and geographic location.

     (b)  Based on the initial risk assessment, each digital asset company shall establish and maintain:

     (1)  An anti-money laundering program that complies with the Anti-Money Laundering Act of 2020;

     (2)  An effective customer due diligence system and monitoring program;

     (3)  Procedures for regularly screening customers against the Specially Designated Nationals and Blocked Persons lists maintained by the Office of Foreign Assets Control and any other government watchlists;

     (4)  Recordkeeping procedures for tracking any cash purchases or transactions and procedures for reporting the cash purchases or transactions to the appropriate federal regulatory agency, as required by the Anti‑Money Laundering Act of 2020;

     (5)  Procedures for monitoring and reporting any suspicious activities; and

     (6)  Policies and procedures for rejecting or blocking any transactions that violate state or federal law.

     (c)  Each digital asset company shall conduct the risk assessment required by subsection (a) annually, or more frequently to address a known risk, and shall modify the company's programs and policies as needed to comply with subsection (b).

     (d)  For the purposes of this section, "customer due diligence" means the process of verifying a customer's identity and assessing the risk associated with the customer to prevent financial crimes like money laundering.

     §   -9  Cybersecurity program.  (a)  Each digital asset company shall establish and maintain a cybersecurity program to ensure the availability and functionality of the digital asset company's electronic systems and to protect the systems from unauthorized access, use, or tampering.  The cybersecurity program shall enable the digital asset company to:

     (1)  Identify internal and external cybersecurity risks by, at a minimum, identifying the information stored on the digital asset company's systems, the sensitivity of the information, and how and by whom the information may be accessed;

     (2)  Protect the digital asset company's electronic systems and the information stored on the systems from unauthorized access, use, or other malicious acts through the use of defensive infrastructure and the implementation of policies and procedures;

     (3)  Detect system intrusions, data breaches, unauthorized access to systems or information, malware, and other cybersecurity events;

     (4)  Respond to detected cybersecurity events to mitigate any negative effects; and

     (5)  Recover from cybersecurity events and restore normal operations and services.

     (b)  Each digital asset company shall implement a written cybersecurity policy setting forth the digital asset company's policies and procedures for the protection of its electronic systems and any customer or counterparty data stored on the company's systems.  The written policy shall be reviewed and approved at least annually by the digital asset company's board of directors or the equivalent governing body.  The written cybersecurity policy shall:

     (1)  Establish policies, procedures, and controls in compliance with subsection (a);

     (2)  Designate a cybersecurity officer;

     (3)  Require the development and implementation of employee training to educate employees on new and emerging cybersecurity risks and threats, to the extent appropriate for each employee's position and responsibilities;

     (4)  Establish methods for testing the digital asset company's cybersecurity systems; and

     (5)  Establish recordkeeping policies.

     §   -10  Fees; bond.  (a)  A digital asset company shall pay the following fees to the division through NMLS to obtain and maintain a valid charter under this chapter:

     (1)  An initial nonrefundable application fee of $9,000;

     (2)  An annual, nonrefundable renewal application fee of $1,000; and

     (3)  Any fees collected by NMLS for the processing of the application, including any applicable fees for:

          (A)  A criminal history background check of the applicant, including each of the applicant's control persons, executive officers, directors, general partners, and managing members, for submission to the Federal Bureau of Investigation or any governmental agency or entity authorized to receive fingerprints for a state, national, and international criminal history background check; and

          (B)  An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act (15 U.S.C. §1681a(p)).

     (b)  Each digital asset company shall also be assessed quarterly fees based on the total value of the company's transactions in the State, measured by the United States dollar equivalent of the digital assets, as recorded in the company's quarterly reports.  The first quarterly fees shall be assessed in the quarter after the applicant obtains a charter, in accordance with the following:

     (1)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is not more than $10,000, the quarterly assessment shall be $2,500;

     (2)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $10,000 but not more than $15,000, the quarterly assessment shall be $3,750;

     (3)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $15,000 but not more than $25,000, the quarterly assessment shall be $6,250;

     (4)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $25,000 but not more than $35,000, the quarterly assessment shall be $8,750; and

     (5)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $35,000, the quarterly assessment shall be $12,500.

     (c)  The assessments shall be paid quarterly on February 15, May 15, August 15, and November 15 of each year, based on the digital asset company's quarterly reports as of the previous December 31, March 31, June 30, and September 30, respectively.

     (d)  Digital assets shall be based on the United States dollar equivalent of the digital assets held on behalf of customers, calculated from the company's quarterly report based on the trading price of the asset on the digital asset company's platform as of 4:30 p.m. Hawaii-Aleutian Standard Time.

     (e)  If required by the commissioner, the applicant or digital asset company shall file and maintain a surety bond that is approved by the commissioner and executed by the applicant as obligor and by a surety company authorized to operate as a surety in the State.  The surety company's liability as a surety shall not exceed, in the aggregate, the penal sum of the bond; provided that the penal sum of the bond shall be not less than $500,000, based on the annual United States dollar equivalent of the digital asset as reported in the charter application or annual renewal report.

     (f)  The bond required by subsection (e) shall run to the State as obligee for the use and benefit of the State and of any person or persons that may have a cause of action against the digital asset company as obligor under this chapter.  The bond shall be conditioned upon the following:

     (1)  The digital asset company as obligor shall faithfully conform to and abide by this chapter and all rules adopted under this chapter; and

     (2)  The bond shall pay to the State and any person or persons having a cause of action against the digital asset company as obligor any moneys that may become due and owing to the State or those persons under this chapter.

     §   -11  Renewal of charter; annual report; quarterly reports.  (a)  Each digital asset company shall file an annual report in accordance with NMLS policy.  The annual report shall include the digital asset company's most recent audited annual financial statement, including:

     (1)  Balance sheets;

     (2)  A statement of income or loss;

     (3)  A statement of changes in shareholders' equity; and

     (4)  A statement of cash flows;

provided that, if the digital asset company is a wholly owned subsidiary of another corporation, the digital asset company shall submit the consolidated audited annual financial statement of the parent company in lieu of the digital asset company's annual audited financial statement.

     (b)  Each digital asset company shall file quarterly reports, in a form prescribed by the commissioner, that shall include:

     (1)  An accounting of the digital asset company's activities in the State since the prior reporting period, including:

          (A)  The number of stored value accounts opened;

          (B)  The number of transactions processed;

          (C)  The total value of transactions, measured by the United States dollar equivalent of the digital assets;

          (D)  The number of system outages;

          (E)  A chart of accounts, including a description of each account; and

          (F)  Any other information relating to performance metrics or the efficacy of the company, as required by the commissioner;

     (2)  A report of any material changes to any of the information submitted by the digital asset company in the company's original application that has not previously been reported to the commissioner in any other report required under this chapter;

     (3)  Disclosure of any pending or final suspension, revocation, or other enforcement action by any state or government authority; and

     (4)  Any other information required by the commissioner.

     (c)  A digital asset company may renew its charter by:

     (1)  Continuing to meet the requirements of this chapter;

     (2)  Filing a completed renewal application in a form prescribed by NMLS or the commissioner; and

     (3)  Paying a renewal fee.

     (d)  If, at the time the charter renewal is due, the digital asset company has not:

     (1)  Filed an application deemed complete by the commissioner;

     (2)  Filed an annual report and all quarterly reports; or

     (3)  Paid the quarterly fees,

the digital asset company's charter shall be suspended as of the date the renewal is due, unless the company is granted an extension of time by the commissioner.  The digital asset company shall have thirty days after the company's charter is suspended to file the missing documents or to pay the outstanding fees, plus a late filing fee of $250 for each day after suspension that the documents and fees are not made current.  The commissioner, for good cause, may reduce or suspend the late filing fee.

     §   -12  Principal place of business.  (a)  Each digital asset company shall maintain a principal place of business in the United States, regardless of whether the digital asset company maintains its principal office outside the United States.

     (b)  The digital asset company's principal place of business shall be identified in NMLS.

     §   -13  Sale or transfer of charter; change of control.  (a)  No charter granted to a digital asset company shall be transferred, except as provided in this section.

     (b)  A person or group of persons proposing a change of control of a digital asset company shall submit to the commissioner an application requesting approval of the proposed change of control, accompanied by a nonrefundable application fee of $10,000.

     (c)  After reviewing the application submitted pursuant to subsection (b), the commissioner may require the digital asset company or the person or group of persons requesting a change of control, or both, to provide additional information concerning the persons who propose to assume control of the digital asset company.  The additional information shall be limited to the types of information required of a digital asset company as part of its original charter or renewal application.  The information shall include, for the five-year period immediately preceding the date of the application for change of control, a history of any material litigation and any criminal convictions of each person who, upon approval of the application for change of control, would be a principal of the digital asset company.  Authorization shall be given to conduct criminal history record checks of these persons, accompanied by payment of the applicable fee for each record check.

     (d)  The commissioner shall approve an application requesting a change of control under subsections (b) and (c) if the commissioner determines that the person or group of persons requesting approval has the competence, experience, character, and general fitness to control the digital asset company in a lawful and proper manner and that the interests of the public will not be jeopardized by the change of control.

     (e)  A person who:

     (1)  Acts as a proxy for the sole purpose of voting at a designated meeting of the security holders or holders of voting interests in a digital asset company or person in control of a digital asset company;

     (2)  Acquires control of a digital asset company by devise or descent;

     (3)  Acquires control as a personal representative, custodian, guardian, conservator, trustee, or as an officer appointed by a court of competent jurisdiction or by operation of law; or

     (4)  Is exempted by the commissioner,

shall be exempt from the requirements of this section; provided that the digital asset company shall notify the commissioner when control is assumed by the person.

     (f)  Before filing an application requesting the commissioner's approval of a change of control, a person may request, in writing, a determination from the commissioner as to whether the person would be considered a person in control of a digital asset company upon consummation of a proposed transaction.  If the commissioner determines that the person would not be a person in control of a digital asset company, the commissioner shall enter an order to that effect, and the proposed person and transaction shall not be subject to subsections (b) through (d).

     (g)  Subsection (b) shall not apply to public offerings of securities.

     §   -14  Ownership and control of a digital asset.  (a)  To the extent a digital asset company stores, holds, or maintains custody or control of a digital asset on behalf of another person, the digital asset company shall hold a digital asset of the same type and amount as that which is owed or obligated to that person.

     (b)  If a digital asset company violates subsection (a), the property interest the person holds in the digital asset shall be a pro rata property interest in the type of digital asset for which the person is entitled, without regard to the time the person became entitled to the digital asset or the digital asset company obtained control of the digital asset.

     (c)  The digital asset referred to in this section shall:

     (1)  Be held for the person or persons entitled to the digital asset;

     (2)  Not be considered the property of the digital asset company; and

     (3)  Not be subject to the claims of creditors of the digital asset company.

     (d)  No digital asset company shall sell, transfer, assign, lend, hypothecate, pledge, or otherwise use or encumber assets, including digital assets, stored, held, or maintained by, or under the custody or control of, the digital asset company on behalf of another person, except at the direction of that person, unless it is clearly explained to the person that the use or encumberment is the intent of the product.

PART III.  DISCLOSURES, ADVERTISING, AND RECORDKEEPING

     §   -15  Required disclosures.  (a)  A digital asset company that engages in digital asset business activities shall provide to each person using the digital asset company's products or services the disclosures required by subsection (b) and any additional disclosures the commissioner deems necessary for the protection of the company's customers.  The commissioner shall determine the required time for and form of the disclosure.  Any disclosure required by this section shall be made in writing, unless an alternate disclosure method is approved by the commissioner, and shall be issued separately from any other information provided by the digital asset company.

     (b)  Before doing business with a person, a digital asset company shall disclose to the person, to the extent applicable to the person's intended business activities:

     (1)  The amount and timing of any fees and charges the digital asset company may assess, or how the fees and charges will be calculated if the fees or charges are not established in advance;

     (2)  Whether the product or service provided by the digital asset company is covered by:

          (A)  A form of insurance or is otherwise guaranteed against loss by an agency of the United States, including the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation; or

          (B)  Private insurance against theft or loss, including cyber theft or theft by other means;

     (3)  The irrevocability of a transfer or exchange;

     (4)  The method by which the person can update the person's contact information with the digital asset company;

     (5)  That the date or time that the person initiates instructions to make a transfer or exchange may differ from the date or time when the transfer or exchange is actually completed and the person's account is debited;

     (6)  The person's right to at least thirty days' notice if the digital asset company changes its fee schedule, terms and conditions of its business activities with the person, or other policies applicable to the person's account; and

     (7)  That digital assets are not money.

     (c)  At the end of a digital asset transaction with or on behalf of a person, a digital asset company shall provide to the person, in writing:

     (1)  The name and contact information of the digital asset company, and any information the person may need to ask a question or file a complaint;

     (2)  The type, value, date, precise time, and amount of the transaction; and

     (3)  Any fees charged for the transaction, including any charge for converting a digital asset to money, bank credit, or another digital asset.

     §   -16  Tangible net worth requirement; records.  (a)  A digital asset company engaged in digital asset business activities shall maintain at all times a tangible net worth of at least $500,000, or an amount determined by the commissioner to be necessary to ensure the company's sound operations.

     (b)  Each digital asset company shall create, preserve, and make available for inspection by the commissioner the books, accounts, and other records required by subsection (c) in a form that enables the commissioner to determine whether the digital asset company is in compliance with this chapter, any relevant court order, and other laws of the State.

     (c)  For each digital asset business activity conducted with or on behalf of a person, the digital asset company shall maintain for five years after the date of the activity a record of:

     (1)  Each transaction, including the:

          (A)  Identity and address of the person and, to the extent feasible, the identity and address of any other parties to the transaction;

          (B)  Account number of the person;

          (C)  Form, amount, and date of the transaction; and

          (D)  Any payment instructions given by the person;

     (2)  The aggregate number of transactions and aggregate value of transactions with or on behalf of the person in the previous twelve calendar months, expressed in the United States dollar equivalent of the digital assets;

     (3)  Each transaction with or on behalf of the person in which the digital asset company exchanged one form of digital asset for money or another form of digital asset;

     (4)  A general ledger, posted to at least monthly, that lists all of the digital asset company's assets, liabilities, capital, income, ownership equity, and expenses;

     (5)  Each call report related to the person that the digital asset company is required by law to create or provide to the division or NMLS;

     (6)  The account number and address of each bank the digital asset company used in conducting its digital asset business activity with the person and the bank statements and bank reconciliation records for those accounts;

     (7)  If the person filed a customer complaint, any communications and documentation related to the investigation of the complaint; and

     (8)  A report of any digital asset business activity transaction with or on behalf of the person that the digital asset company was unable to complete.

     §   -17  Advertising and marketing.  (a)  No digital asset company engaged in digital asset business activities shall advertise its products, services, or activities in the State, or advertise to consumers in the State, unless the advertisement includes the name of the company and confirmation that the digital asset company is "Chartered by the State of Hawaii Department of Commerce and Consumer Affairs' Division of Financial Institutions to engage in digital asset business activity."

     (b)  Each digital asset company shall maintain for at least five years from the date of the materials' creation, and make available for examination by the commissioner, all advertising and marketing materials, including advertising or marketing through:

     (1)  Print media, including brochures;

     (2)  Digital media and internet websites;

     (3)  Television and video streaming services;

     (4)  Radio and audio streaming services; and

     (5)  Presentation materials;

provided that if material changes are made to internet or digital advertising or marketing materials, the digital asset company shall maintain screenshots or transcripts reflecting the changes.

     (c)  In all advertising and marketing materials, the digital asset company and any person or entity acting on the company's behalf shall:

     (1)  Comply with all disclosure requirements under state and federal law; and

     (2)  Avoid making, directly or by implication, any false, misleading, or deceptive representations or omissions.

     §   -18  Confidentiality.  (a)  Except as provided in title 12 United States Code section 5111, the following shall continue to apply to information and materials after the information or material has been disclosed to NMLS or any federal or state regulatory officials having authority over transactions under this chapter:

     (1)  Any federal or state law regarding the privacy or confidentiality of information or materials provided to NMLS; and

     (2)  Any privilege arising under federal or state law or the rules of any federal or state court.

     (b)  For the purposes of this section, the commissioner may enter into agreements or sharing arrangements with other governmental agencies, the Conference of State Bank Supervisors, or other associations representing governmental agencies.

     (c)  Information or material that is subject to a privilege or confidentiality under subsection (a) shall not be subject to:

     (1)  Disclosure under chapter 92F; or

     (2)  Subpoena, discovery, or admission into evidence in any private civil action or administrative proceeding, unless:

          (A)  The privilege is determined by NMLS to be inapplicable to the information or material; or

          (B)  The person to whom the information or material pertains waives the privilege.

     (d)  Notwithstanding chapter 92F, investigations and examinations authorized under section     -20 and any related information and documents, including reports of the investigation or examination, shall be confidential and shall not be subject to discovery or disclosure in any civil lawsuit or criminal proceeding.

     (e)  If a conflict exists between this section and any other provision of state law relating to the disclosure of privileged or confidential information or material, this section shall control.

     (f)  This section shall not apply to information or material relating to the employment history of, or any publicly adjudicated disciplinary or enforcement actions against, any persons whose information is publicly accessible in NMLS.

PART IV.  ENFORCEMENT

     §   -19  Enforcement authority; violations; penalties.  (a)  The commissioner may take any disciplinary action specified in subsection (b) against an applicant or digital asset company if the applicant; digital asset company; or any control person, executive officer, director, general partner, or managing member of the applicant or digital asset company has:

     (1)  Violated this chapter or any rule adopted or order issued pursuant to this chapter;

     (2)  Failed to disclose facts or conditions that, had those facts or conditions been known at the time the application for charter was made, would have justified the commissioner in denying the application;

     (3)  Failed to provide within a reasonable time any information required by the commissioner;

     (4)  Failed to provide or maintain proof of financial responsibility;

     (5)  Become insolvent;

     (6)  Made in any document or statement filed with the commissioner a false representation of a material fact or omitted a material fact;

     (7)  Been convicted of or entered a plea of guilty or nolo contendre to a crime involving fraud, deceit, or any similar crime;

     (8)  Failed to make, maintain, or produce records in compliance with this chapter or any rule adopted by the commissioner pursuant to chapter 91;

     (9)  Been the subject of any disciplinary action from a state or federal agency that resulted in the revocation of a license or charter;

    (10)  Had a final judgement entered against the applicant or digital asset company for a violation of:

          (A)  This chapter;

          (B)  Any state or federal law concerning a digital asset license or charter or money transmitter license; or

          (C)  Any state or federal law prohibiting unfair or deceptive acts or practices; or

    (11)  Failed to take, or provide proof of taking, timely corrective action as required by the commissioner after an investigation or examination pursuant to section     -20.

     (b)  If the commissioner finds that an applicant or a digital asset company has committed one or more violations under subsection (a), the commissioner may:

     (1)  Deny an application for a charter or branch office;

     (2)  Suspend or revoke the charter in accordance with section     -23;

     (3)  Order the digital asset company to cease and desist from engaging in any act specified in subsection (a), in accordance with section     -24;

     (4)  Order the digital asset company to refund to customers any excess charges under this chapter; or

     (5)  Impose penalties of up to $20,000 for each violation, in accordance with section     -26.

     (c)  The commissioner may issue a temporary cease and desist order if the commissioner finds that the digital asset company, applicant, or other person subject to this chapter is engaging, has engaged, or is about to engage in an illegal, unauthorized, unsafe, or unsound practice in violation of this chapter.

     (d)  If the commissioner denies or revokes a charter or takes other disciplinary action pursuant to this chapter, the commissioner shall enter an order to that effect and notify the applicant or digital asset company of the denial, revocation, or other disciplinary action by personal service or certified mail to the last known address of the applicant or digital asset company as shown on the application or charter, or as furnished in writing to the commissioner.

     (e)  No revocation, suspension, consent order, or surrender of a charter shall impair or affect the obligations of any preexisting lawful contract between a digital asset company and a consumer.

     (f)  The commissioner may reinstate a charter, terminate a suspension, or grant a charter to a digital asset company or person whose charter has been revoked, suspended, or denied if no fact or condition then exists that would clearly justify the revocation, suspension, or denial.

     (g)  The commissioner may impose on a digital asset company, applicant, or other person subject to this chapter an administrative fine if the commissioner finds, on the record after notice and an opportunity for a hearing, that the digital asset company, applicant, or person has violated or failed to comply with any requirement of this chapter or any rule adopted or order issued under this chapter.

     (h)  Each violation or failure to comply with any directive or order of the commissioner shall be a separate violation.

     §   -20  Investigation and examination; authority.  (a)  In addition to the powers granted to the commissioner under section     -3, the commissioner may conduct investigations and examinations in accordance with this section and, for purposes of an investigation or examination, may:

     (1)  Access, receive, and use any books, accounts, records, files, documents, or information that the commissioner deems relevant to the investigation or examination, regardless of the location, possession, control, or custody of the documents, information, or evidence;

     (2)  Review, investigate, or examine any digital asset company or person subject to this chapter as often as necessary to carry out the purposes of this chapter;

     (3)  Direct, subpoena, or order the attendance of, and examine under oath, any person whose testimony may be required regarding a digital asset transaction, digital asset business activity, or any other subject matter of the investigation or examination; and

     (4)  Direct, subpoena, or order a person to produce books, accounts, records, files, and any other documents the commissioner deems relevant.

     (b)  Each digital asset company or other person subject to this chapter shall provide to the commissioner, upon the commissioner's request, any books or records relating to the company or person's digital asset business activities.  The commissioner shall also be permitted to interview the control persons, executive officers, directors, general partners, managing members, principals, managers, employees, independent contractors, agents, and consumers who may have information about the digital asset company or its digital asset business activities.

     (c)  If directed by the commissioner, each digital asset company or person subject to this chapter shall make or compile reports or prepare other information to support the commissioner's investigation or examination, including:

     (1)  Accounting compilations;

     (2)  Information, lists, or data concerning digital asset transactions in a format prescribed by the commissioner; or

     (3)  Any other information the commissioner deems necessary.

     (d)  In conducting any investigation or examination authorized by this chapter, the commissioner may control access to any documents or records of the digital asset company or person under investigation or examination.  The commissioner may take possession of the documents or records or place a person in exclusive charge of the documents or records.  During the period of control, no person shall remove or attempt to remove any of the documents or records except pursuant to a court order or with the consent of the commissioner; provided that, unless the commissioner has reasonable grounds to believe the records or documents have been, or are at risk of being, altered or destroyed, the commissioner shall give consent for the digital asset company or owner of the documents or records to access the documents or records as necessary to conduct the company's or person's ordinary business affairs.

     (e)  This section shall apply even if a digital asset company or person subject to this chapter acts or claims to act without the State's authority.

     (f)  No digital asset company or person subject to investigation or examination under this section shall knowingly withhold, abstract, remove, mutilate, destroy, or conceal any relevant books, records, computer records, or other information.

     (g)  For each digital asset company or person investigated or examined under this section, the commissioner may charge an investigation or examination fee, payable to the commissioner, based upon the cost per hour, per examiner, for the investigation or examination.  The hourly fee shall be $60 or an amount established by the commissioner by rule pursuant to chapter 91.  In addition to the investigation or examination fee, the commissioner may charge any digital asset company or person who is investigated or examined pursuant to this section additional fees, payable to the commissioner, for travel, per diem, mileage, or other reasonable expenses incurred in connection with the investigation or examination.

     (h)  Any person having reason to believe that this chapter, or any rules adopted or orders issued under this chapter, have been violated, or that a charter issued under this chapter should be suspended or revoked, may file a written complaint with the commissioner, setting forth the details of the alleged violation or grounds for suspension or revocation.

     §   -21  Prohibited practices.  (a)  Except as otherwise provided by law, no digital asset company, including the company's control persons, executive officers, directors, general partners, managing members, employees, or independent contractors, or any other person subject to this chapter shall, directly or indirectly:

     (1)  Engage in any act that attempts to limit or restrict the application of this chapter;

     (2)  Use a customer's digital asset account number to prepare, issue, or create a transaction on behalf of the customer without the customer's authorization;

     (3)  Charge, collect, or receive any fees for negotiating a digital asset transaction, other than fees authorized by this chapter, rules adopted pursuant to this chapter, or any other applicable state or federal law;

     (4)  Fail to make any disclosures required by this chapter, rules adopted pursuant to this chapter, or any other applicable state or federal law;

     (5)  Employ any scheme, device, or artifice to defraud or mislead any consumer or person;

     (6)  Engage in any unfair or deceptive acts, practices, or advertising in connection with a digital asset business activity;

     (7)  Obtain a digital asset by fraud or misrepresentation;

     (8)  Conduct any digital asset business activity with or on behalf of any person physically located in the State through the use of the Internet, facsimile, telephone, kiosk, or any other means, without first obtaining a charter under this chapter;

     (9)  Make a false or deceptive statement or representation to consumers, including statements regarding rates, fees, financing terms, or any other conditions placed on digital asset business activities;

    (10)  Make a false statement or knowingly omit a material fact in connection with any reports filed with the division or investigation or examination conducted by the division;

    (11)  Conduct digital asset business activities from any location not authorized by the commissioner as a principal place of business or branch office;

    (12)  Draft funds from any depository financial institution without the written approval of the consumer; provided that nothing in this paragraph shall prohibit the conversion of a negotiable instrument into an electronic form for processing through the Automated Clearing House or a similar system;

    (13)  Fail to comply with all applicable state and federal laws controlling the activities governed by this chapter; or

    (14)  Fail to pay any fee, assessment, or moneys due to the department.

     (b)  In addition to any other penalty provided for under this chapter, any digital asset transaction conducted in violation of subsection (a) shall be void and unenforceable.

     §   -22  Voluntary surrender of a charter.  (a)  A digital asset company may voluntarily cease business and surrender the company's charter by giving written notice of the intended surrender to the commissioner through NMLS.

     (b)  Notice to the commissioner shall be provided at least thirty days before the surrender of the charter and shall include:

     (1)  The date of the surrender;

     (2)  The name, address, telephone number, facsimile number, and electronic mail address of a person within the digital asset company having sufficient knowledge and authority to communicate with the commissioner regarding all matters relating to the company;

     (3)  The reason for the surrender;

     (4)  Information relating to the digital asset company's outstanding digital asset transactions in the State, including the:

          (A)  Total dollar amount of the digital asset company's outstanding digital asset transactions;

          (B)  Dollar amount of each outstanding digital asset transaction; and

          (C)  Name, address, and telephone number of each person with whom the digital asset company has an outstanding digital asset transaction;

     (5)  A list of the digital asset company's authorized branch offices, if any;

     (6)  Confirmation that the digital asset company has notified each of its authorized branch offices, if any, that the branch offices shall no longer conduct digital asset business activities on the company's behalf; and

     (7)  Confirmation that the digital asset company has notified each of its digital asset accounts, if any, that the digital asset account is being transferred and has provided contact information for the digital asset company or entity to which the digital asset is being assigned.

     §   -23  Suspension or revocation of a charter.  The commissioner may suspend or revoke a charter if the commissioner finds that:

     (1)  A fact or condition exists that, had it existed when the digital asset company applied for the charter, would have been grounds for denying the digital asset company's application;

     (2)  The digital asset company's tangible net worth has become insufficient and the company, after ten days' written notice from the commissioner, failed to take the steps required by the commissioner to remedy the insufficiency;

     (3)  The digital asset company has knowingly violated any material provision of this chapter or any rule adopted or order issued under this chapter;

     (4)  The digital asset company is conducting, or has conducted, its business in an unsafe or unsound manner;

     (5)  The digital asset company has become insolvent;

     (6)  The digital asset company has suspended payment of its obligations, made an assignment for the benefit of its creditors, or admitted in writing its inability to pay its debts as they become due;

     (7)  The digital asset company has filed for bankruptcy, reorganization, arrangement, or any other relief under federal bankruptcy laws;

     (8)  The digital asset company refuses to permit the commissioner to undertake an investigation or examination that is authorized by this chapter; or

     (9)  The competence, experience, character, or general fitness of the digital asset company indicates that it is no longer in the public interest to allow the company to hold a charter.

     §   -24  Orders to cease and desist.  (a)  The commissioner may issue an order requiring a digital asset company to cease and desist if the commissioner determines that the digital asset company's violation of this chapter, or a rule adopted or order issued under this chapter, is likely to cause:

     (1)  Immediate and irreparable harm to the digital asset company, the digital asset company's customers, or the public; or

     (2)  The insolvency or a significant dissipation of the assets of the digital asset company.

     (b)  An order to cease and desist shall be effective upon the service of the order and shall remain in effect pending the completion of an administrative proceeding pursuant to chapter 91; provided that the digital asset company may petition the circuit court for a judicial order setting aside, limiting, or suspending the order pending the completion of the administrative proceeding.

     (c)  The commissioner shall hold an administrative proceeding no later than twenty calendar days after issuing an order to cease and desist.

     (d)  The commissioner may also apply to the circuit court for a temporary restraining order or other injunctive relief, as necessary, to protect the public interest.

     §   -25  Consent orders.  The commissioner may enter into a consent order with a person at any time to resolve a matter arising under this chapter.  The consent order shall be signed by the person to whom the order is issued, or the person's authorized representative, and shall indicate the person's agreement with the terms of the order.  A consent order may provide that the order does not constitute an admission by the person that this chapter, or a rule adopted or order issued under this chapter, has been violated.

     §   -26  Civil penalties.  (a)  The commissioner may assess a fine against a person who violates this chapter, or a rule adopted or order issued under this chapter, in an amount not to exceed $10,000 per violation, plus the State's costs and expenses for investigating and litigating the matter, including reasonable attorneys' fees.

     (b)  Any violation of this chapter that is directed toward, targets, or injures an elder may be subject to an additional civil penalty of not more than $10,000 per violation, in addition to any other fines or penalties assessed for the violation.

     §   -27  Criminal penalties.  (a)  A person who intentionally makes a false statement, misrepresentation, or false certification in a record filed or required to be maintained under this chapter, including a person who makes a false entry or omits a material entry in a record, shall be guilty of a class C felony and shall be subject to a fine of not more than $10,000.

     (b)  A person who knowingly engages in any activity for which a charter is required under this chapter without holding a charter shall be guilty of a misdemeanor and shall be subject to a fine of not more than $1,000, imprisonment for not more than one year, or both; provided that each day a violation of this chapter exists shall be a separate offense.

     §   -28  Unchartered persons.  (a)  If the commissioner has reason to believe that a person is conducting digital asset business activities without a charter, in violation of section     -4, the commissioner may:

     (1)  Issue an order for the person to show cause why the commissioner should not issue an order to cease and desist;

     (2)  Issue an order to cease and desist pursuant to section     -24; provided that an order to cease and desist shall be effective upon service of the order; provided further that a person who is served with an order to cease and desist for an alleged violation of section     -4 may petition the circuit court for a judicial order setting aside, limiting, or suspending the order pending the completion of an administrative proceeding pursuant to section     -29; or

     (3)  If the public would be irreparably harmed by the person's continued unchartered digital asset business activities, petition the circuit court in the appropriate jurisdiction for the issuance of a temporary restraining order.

     (b)  The commissioner shall hold an administrative proceeding no later than twenty calendar days after issuing an order to cease and desist.

     §   -29  Administrative procedures.  All administrative proceedings under this chapter shall be conducted in accordance with chapter 91.

     §   -30  Hearings.  Except as otherwise provided in this chapter, the commissioner shall not suspend or revoke a charter, issue an order to cease and desist, or assess a civil penalty without providing the digital asset company, applicant, or other person subject to this chapter with notice and an opportunity to be heard.

     §   -31  Division functions.  (a)  The division shall exercise all administrative functions of the State in regulating, supervising, and issuing charters to digital asset companies.

     (b)  The division may adopt rules pursuant to chapter 91 as necessary to effectuate the purposes of this chapter."

     SECTION 3.  Section 489D-4, Hawaii Revised Statutes, is amended by amending the definition of "monetary value" to read as follows:

     ""Monetary value" means a medium of exchange, whether or not redeemable in money[.], except value defined as a digital asset under chapter     ."

     SECTION 4.  Section 846-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Criminal history record checks may be conducted by:

     (1)  The department of health or its designee on operators of adult foster homes for individuals with developmental disabilities or developmental disabilities domiciliary homes and their employees, as provided by section 321-15.2;

     (2)  The department of health or its designee on prospective employees, persons seeking to serve as providers, or subcontractors in positions that place them in direct contact with clients when providing non-witnessed direct mental health or health care services, as provided by section 321-171.5;

     (3)  The department of health or its designee on all applicants for licensure or certification for, operators for, prospective employees, adult volunteers, and all adults, except adults in care, at healthcare facilities as defined in section 321-15.2;

     (4)  The department of education on employees, prospective employees, and teacher trainees in any public school in positions that necessitate close proximity to children, as provided by section 302A-601.5;

     (5)  The counties on employees and prospective employees who may be in positions that place them in close proximity to children in recreation or child care programs and services;

     (6)  The county liquor commissions on applicants for liquor licenses, as provided by section 281-53.5;

     (7)  The county liquor commissions on employees and prospective employees involved in liquor administration, law enforcement, and liquor control investigations;

     (8)  The department of human services on operators and employees of child caring institutions, child placing organizations, and resource family homes, as provided by section 346-17;

     (9)  The department of human services on prospective adoptive parents as established under section 346‑19.7;

    (10)  The department of human services or its designee on applicants to operate child care facilities, household members of the applicant, prospective employees of the applicant, and new employees and household members of the provider after registration or licensure, as provided by section 346-154, and persons subject to section 346-152.5;

    (11)  The department of human services on persons exempt pursuant to section 346-152 to be eligible to provide child care and receive child care subsidies, as provided by section 346-152.5;

    (12)  The department of health on operators and employees of home and community-based case management agencies and operators and other adults, except for adults in care, residing in community care foster family homes, as provided by section 321-15.2;

    (13)  The department of human services on staff members of the Hawaii youth correctional facility, as provided by section 352-5.5;

    (14)  The department of human services on employees, prospective employees, and volunteers of contracted providers and subcontractors in positions that place them in close proximity to youth when providing services on behalf of the office of youth services or the Hawaii youth correctional facility, as provided by section 352D-4.3;

    (15)  The judiciary on employees and applicants at detention and shelter facilities, as provided by section 571-34;

    (16)  The department of corrections and rehabilitation on employees and prospective employees, volunteers, contract service providers, and subcontract service providers who are directly involved with the treatment and care of, or directly involved in providing correctional programs and services to, persons committed to a correctional facility, or placed in close proximity to persons committed when providing services on behalf of the department or the correctional facility, as provided by section 353-1.5, and the department of law enforcement on employees and prospective employees whose duties involve or may involve the exercise of police powers including the power of arrest, as provided by section 353C-5;

    (17)  The board of private detectives and guards on applicants for private detective or private guard licensure, as provided by section 463-9;

    (18)  Private schools and designated organizations on employees and prospective employees who may be in positions that necessitate close proximity to children; provided that private schools and designated organizations receive only indications of the states from which the national criminal history record information was provided pursuant to section 302C-1;

    (19)  The public library system on employees and prospective employees whose positions place them in close proximity to children, as provided by section 302A_‑601.5;

    (20)  The State or any of its branches, political subdivisions, or agencies on applicants and employees holding a position that has the same type of contact with children, vulnerable adults, or persons committed to a correctional facility as other public employees who hold positions that are authorized by law to require criminal history record checks as a condition of employment, as provided by section 78-2.7;

    (21)  The department of health on licensed adult day care center operators, employees, new employees, subcontracted service providers and their employees, and adult volunteers, as provided by section 321-15.2;

    (22)  The department of human services on purchase of service contracted and subcontracted service providers and their employees and volunteers, as provided by sections 346-2.5 and 346-97;

    (23)  The department of human services on foster grandparent program, senior companion program, and respite companion program participants, as provided by section 346-97;

    (24)  The department of human services on contracted and subcontracted service providers and their current and prospective employees that provide home and community‑based services under section 1915(c) of the Social Security Act, title 42 United States Code section 1396n(c), or under any other applicable section or sections of the Social Security Act for the purposes of providing home and community-based services, as provided by section 346-97;

    (25)  The department of commerce and consumer affairs on proposed directors and executive officers of a bank, savings bank, savings and loan association, trust company, and depository financial services loan company, as provided by section 412:3-201;

    (26)  The department of commerce and consumer affairs on proposed directors and executive officers of a nondepository financial services loan company, as provided by section 412:3-301;

    (27)  The department of commerce and consumer affairs on the original chartering applicants and proposed executive officers of a credit union, as provided by section 412:10-103;

    (28)  The department of commerce and consumer affairs on:

          (A)  Each principal of every non-corporate applicant for a money transmitter license;

          (B)  Each person who upon approval of an application by a corporate applicant for a money transmitter license will be a principal of the licensee; and

          (C)  Each person who upon approval of an application requesting approval of a proposed change in control of licensee will be a principal of the licensee,

          as provided by sections 489D-9 and 489D-15;

    (29)  The department of commerce and consumer affairs on applicants for licensure and persons licensed under title 24;

    (30)  The Hawaii health systems corporation on:

          (A)  Employees;

          (B)  Applicants seeking employment;

          (C)  Current or prospective members of the corporation board or regional system board; or

          (D)  Current or prospective volunteers, providers, or contractors,

          in any of the corporation's health facilities, as provided by section 323F-5.5;

    (31)  The department of commerce and consumer affairs on:

          (A)  An applicant for a mortgage loan originator license, or license renewal; and

          (B)  Each control person, executive officer, director, general partner, and managing member of an applicant for a mortgage loan originator company license or license renewal,

          as provided by chapter 454F;

    (32)  The state public charter school commission or public charter schools on employees, teacher trainees, prospective employees, and prospective teacher trainees in any public charter school for any position that places them in close proximity to children, as provided in section 302D-33;

    (33)  The counties on prospective employees who work with children, vulnerable adults, or senior citizens in community-based programs;

    (34)  The counties on prospective employees for fire department positions that involve contact with children or vulnerable adults;

    (35)  The counties on prospective employees for emergency medical services positions that involve contact with children or vulnerable adults;

    (36)  The counties on prospective employees for emergency management positions and community volunteers whose responsibilities involve planning and executing homeland security measures including viewing, handling, and engaging in law enforcement or classified meetings and assisting vulnerable citizens during emergencies or crises;

    (37)  The State and counties on employees, prospective employees, volunteers, and contractors whose position responsibilities require unescorted access to secured areas and equipment related to a traffic management center;

    (38)  The State and counties on employees and prospective employees whose positions involve the handling or use of firearms for other than law enforcement purposes;

    (39)  The State and counties on current and prospective systems analysts and others involved in an agency's information technology operation whose position responsibilities provide them with access to proprietary, confidential, or sensitive information;

    (40)  The department of commerce and consumer affairs on:

          (A)  Applicants for real estate appraiser licensure or certification, as provided by chapter 466K;

          (B)  Each person who owns more than ten per cent of an appraisal management company who is applying for registration as an appraisal management company, as provided by section 466M-7; and

          (C)  Each of the controlling persons of an applicant for registration as an appraisal management company, as provided by section 466M-7;

    (41)  The department of health or its designee on:

          (A)  Individual applicants or individuals acting on behalf of applying entities for hemp processor permits, as provided under section 328G-2; and

          (B)  All license applicants, licensees, employees, contractors, and prospective employees of medical cannabis dispensaries, and individuals permitted to enter and remain in medical cannabis dispensary facilities, as provided under sections 329D-15(a)(4) and 329D-16(a)(3);

    (42)  The department of commerce and consumer affairs on applicants for nurse licensure or license renewal, reactivation, or restoration, as provided by sections 457-7, 457-8, 457-8.5, and 457-9;

    (43)  The county police departments on applicants for permits to acquire firearms pursuant to section 134-2, on individuals registering their firearms pursuant to section 134-3, and on applicants for new or renewed licenses to carry a pistol or revolver and ammunition pursuant to section 134-9;

    (44)  The department of commerce and consumer affairs on:

          (A)  Each of the controlling persons of the applicant for licensure as an escrow depository, and each of the officers, directors, and principals who will be in charge of the escrow depository's activities upon licensure; and

          (B)  Each of the controlling persons of an applicant for proposed change in control of an escrow depository licensee, and each of the officers, directors, and principals who will be in charge of the licensee's activities upon approval of the application,

          as provided by chapter 449;

    (45)  The department of taxation on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 231-1.6;

    (46)  The department of labor and industrial relations on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 383-110;

    (47)  The department of human services on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, and on current or prospective employees, volunteers, contractors, or contractors' employees or volunteers, subcontractors, or subcontractors' employees or volunteers, whose position places or would place them in close proximity to minors, young adults, or vulnerable adults, as provided by section 346-2.5;

    (48)  The child support enforcement agency on current or prospective employees, or contractors who have access to federal tax information to comply with federal law, regulation, or procedure, as provided by section 576D-11.5;

    (49)  The department of the attorney general on current or prospective employees, contractors, [contractor's] contractors' employees, or subcontractors who have access to federal tax information to comply with federal law, regulation, or procedure, as provided by section 28‑17;

    (50)  The department of commerce and consumer affairs on each control person, executive officer, director, general partner, and managing member of an installment loan licensee, or an applicant for an installment loan license, as provided in chapter 480J;

    (51)  The department of commerce and consumer affairs on each person, control person, executive officer, director, general partner, and managing member of a digital asset company or applicant for a digital asset charter, as provided in chapter     ;

   [(51)] (52)  The university of Hawaii on current and prospective employees and contractors whose duties include ensuring the security of campus facilities and persons;

   [(52)] (53)  The department of commerce and consumer affairs on applicants for physician licensure or license renewal, through the Interstate Medical Licensure Compact, as provided by section 453B-2; and

   [(53)] (54)  Any other organization, entity, or the State, its branches, political subdivisions, or agencies as may be authorized by state law."

     SECTION 5.  (a)  Notwithstanding any other law to the contrary, a company that participated in the Hawaii digital currency innovation lab operated by the department of commerce and consumer affairs and Hawaii technology development corporation may continue conducting digital asset business activities until six months after the company's completed application for a charter is submitted pursuant to chapter     , Hawaii Revised Statutes, or until the commissioner of financial institutions approves or denies the application, whichever occurs first; provided that the company shall submit a completed application for a charter no later than March 1, 2027; provided further that the commissioner, for good cause, may reduce or extend the six-month period.

     (b)  The submission of an application for charter shall be evidenced through the Nationwide Multistate Licensing System and Registry developed and maintained by the Conference of State Bank Supervisors.

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $500,000 or so much thereof as may be necessary for fiscal year 2026-2027 to establish and implement a digital asset charter program pursuant to section 2 of this Act.

     The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2050; provided that the digital asset charter requirements established by section 2 of this Act shall take effect on January 1, 2027; provided further that the amendments made to section 846-2.7, Hawaii Revised Statutes, by section 4 of this Act shall not be repealed when that section is repealed and reenacted pursuant to Act 110, Session Laws of Hawaii 2024.

 

 

 

Report Title:

DCCA; DFI; Digital Asset Companies; Digital Asset Charter; Appropriation

 

Description:

Establishes within the Department of Commerce and Consumer Affairs' Division of Financial Institutions, beginning 1/1/2027, a digital asset charter program for licensing, regulating, and overseeing digital asset companies and digital asset business activities.  Authorizes companies that participated in the Hawaii Digital Currency Innovation Lab to temporarily continue digital asset business activities without a charter in certain circumstances.  Appropriates funds.  Effective 7/1/2050.  (SD1)

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

 

THE SENATE	S.B. NO.	2757
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to digital asset CHARTERS.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that the use and trading of digital assets, including cryptocurrencies, e-money, network money, e-cash, and other forms of digital currencies, are growing in global popularity.  Digital assets have value but may be recorded in decentralized ledgers or company databases and do not have a physical form like bank notes or coins.  Most digital assets are not issued by government bodies and are not considered legal tender.  Although some states treat digital assets as falling within the states' money transmitter laws, the industry is largely unregulated in the United States.

     The legislature further finds that in 2020, the Hawaii technology development corporation partnered with the department of commerce and consumer affairs' division of financial institutions to conduct a pilot project on digital currencies.  The project included the establishment of the Hawaii digital currency innovation lab to study the landscape of digital currency activities within the State.  The project's findings indicated that digital asset companies do not require a State‑issued money transmitter license to conduct business in Hawaii.  Although some federal regulations apply to digital asset activities, the lack of state regulation may place consumers at risk of fraud and financial abuse.  The legislature believes that the pilot project's findings, and the financial risks to consumers, support the need for a new state regulatory framework for digital asset companies and digital asset activities.

     Accordingly, the purpose of this Act is to:

     (1)  Establish a digital asset charter program to license, regulate, and oversee digital asset companies and digital asset business activities; and

     (2)  Authorize any company that participated in the Hawaii digital currency innovation lab to temporarily continue conducting digital asset business activities without a charter, in certain circumstances.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

digital asset CHARTERS

PART i.  GENERAL PROVISIONS

     §   -1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Charter" means the digital asset licensure required under this chapter.

     "Commissioner" means the commissioner of financial institutions for the department of commerce and consumer affairs.

     "Consumer" means a natural person who engages in a digital asset transaction primarily for personal, family, or household purposes.

     "Control over a digital asset" means the power to execute unilaterally or prevent indefinitely a digital asset transaction.

     "Control person" means a person that directly or indirectly exercises control over a digital asset.

     "Department" means the department of commerce and consumer affairs.

     "Digital asset" means an electronically stored unit of value that can be owned, transferred, or traded.  "Digital asset" includes a digital representation of value that:

     (1)  Has a centralized depository or administrator, including stablecoins;

     (2)  Is decentralized and has no centralized depository or administrator; or

     (3)  Is created or obtained by a computing or manufacturing effort.

     "Digital asset" does not include a digital representation of value that cannot be converted into, or redeemed for, currency or another digital asset but is:

     (1)  Used solely within an online gaming platform;

     (2)  Redeemable for goods, services, discounts, or purchases as part of a customer affinity or rewards program offered by the issuer or another designated merchant; or

     (3)  Accessed via a prepaid card.

     "Digital asset administration" means the issuance of a digital asset with the authority to redeem the digital asset for money, bank credit, or another digital asset.

     "Digital asset business activity" means business activities that involve:

     (1)  Exchanging, transferring, or storing a digital asset or engaging in digital asset administration, whether directly or through an agreement with a digital asset control-services vendor;

     (2)  Exchanging one or more digital representations of value used within an online game, gaming platform, or family of games for moneys or bank credit outside that online game, gaming platform, or family of games, if the moneys or bank credit are offered by or on behalf of the same publisher from which the original digital representation of value was received;

     (3)  Storing, holding, or maintaining custody or control of a digital asset on behalf of another person; or

     (4)  Buying or selling a digital asset as a business; performing exchange services as a business; or controlling, administering, or issuing a digital asset.

     "Digital asset company" means a person or company holding a charter under this chapter to engage in digital asset business activities.

     "Digital asset control-services vendor" means a person that has control of a digital asset owned by a third party, under an agreement with another person.

     "Digital asset wallet" means a tool used to store and manage digital assets that are not federally insured.

     "Division" means the division of financial institutions of the department of commerce and consumer affairs.

     "Elder" means a person who is sixty-two years of age or older.

     "Examination" means a scheduled review by the division, not requiring a prior complaint, to verify that the digital asset company is operating within the law.

     "Exchange" means the conversion of:

     (1)  Fiat currency or another asset of value into a digital asset;

     (2)  A digital asset into fiat currency or another asset of value; or

     (3)  One form of digital asset into another form of digital asset.

     "Fiat currency" means a government-issued currency that is not backed by a physical commodity, such as gold or silver.

     "Investigation" means a review by the division based on a prior complaint or a report indicating that the company is not operating within the law or is experiencing financial or other difficulties.

     "NMLS" has the same meaning as defined in section 454F-1.

     "Person" means an individual, sole proprietorship, partnership, corporation, limited liability company, limited liability partnership, or other association of individuals, however organized.

     "Stablecoin" means a digital asset designed to maintain a stable value by being:

     (1)  Attached to a traditional currency like the United States dollar or an exchange-traded commodity; or

     (2)  Backed by reserves to reduce price volatility.

     "Stored value" means a monetary value that is evidenced by an electronic record.

     "Tangible net worth" means total assets, excluding intangible assets, less total liabilities, in accordance with generally accepted accounting principles of the United States.

     "Transfer" means to assume control of a digital asset from or on behalf of another person and to:

     (1)  Credit the digital asset to the account of another person;

     (2)  Move the digital asset from one account to another account belonging to the same person; or

     (3)  Relinquish control of a digital asset to another person.

     "United States dollar equivalent of the digital asset" means the equivalent value of the digital asset in United States dollars on a specific date or during a specified period, as determined by a United States-based digital asset exchange.

     §   -2  Exemptions.  This chapter shall not apply to:

     (1)  The exchange, transfer, or storage of a digital asset, or to digital asset administration, to the extent regulated by the Securities Exchange Act of 1934, as amended (title 15 United States Code chapter 2B), or Commodity Exchange Act (title 7 United States Code chapter 1);

     (2)  Activity by a person that only:

          (A)  Contributes connectivity software or computing power to a:

               (i)  Decentralized digital asset; or

              (ii)  Protocol governing the transfer of the digital asset.

          (B)  Provides data storage or security services for a business engaged in digital asset business activities but does not otherwise engage in digital asset business activities on behalf of another person; or

          (C)  Provides to a person that is otherwise exempt from this chapter a digital asset as an enterprise solution used solely between the two parties; provided that the person has no agreement or relationship with the end user of the digital asset;

     (3)  A person using a digital asset, including creating, investing, buying, selling, or obtaining the digital asset, as payment for the purchase or sale of goods or services solely for academic purposes;

     (4)  A person whose annual digital asset business activity with, or on behalf of, other persons is reasonably expected to be valued, in the aggregate, at $5,000 or less, measured by the United States dollar equivalent of the digital asset;

     (5)  An attorney who provides escrow services to a person;

     (6)  A securities intermediary, as defined in section 490:8-102, or commodity intermediary, as defined in section 490:9-102;

     (7)  A digital asset control-services vendor;

     (8)  A person that:

          (A)  Does not receive compensation from another person for:

               (i)  Providing a digital asset product or service; or

              (ii)  Conducting digital asset business activities; or

          (B)  Is engaged in testing products or services with the person's own funds or digital assets;

     (9)  Non-custodial digital asset business activities by a person using a digital asset that has been:

          (A)  Acknowledged as legal tender by the United States or a government recognized by the United States; or

          (B)  Determined not to be a security by a United States regulatory agency;

    (10)  Banks, bank holding companies, credit unions, savings banks, financial services loan companies, or mutual banks organized under the laws of the United States or any state; or

    (11)  Any other person or class of persons that the commissioner declares exempt from this chapter.

     §   -3  Powers of commissioner.  In addition to any other powers provided by law, the commissioner may:

     (1)  Adopt rules pursuant to chapter 91 as necessary for the administration of this chapter;

     (2)  Issue declaratory rulings or informal, nonbinding interpretations of this chapter;

     (3)  Investigate and conduct hearings regarding any violation of this chapter or any rule, order, or agreement adopted under this chapter;

     (4)  Create fact-finding committees to make recommendations to the commissioner and to support the commissioner's deliberations;

     (5)  Require a charter applicant or any of the applicant's control persons, executive officers, directors, general partners, or managing members, to disclose any relevant criminal history and request a criminal history record check to be conducted pursuant to chapter 846; provided that the applicant shall pay all applicable fees for each criminal history record check;

     (6)  Contract with or employ qualified persons who may be exempt from chapter 76, including accountants, attorneys, investigators, examiners, auditors, or other professionals, to assist the commissioner in exercising the commissioner's powers and duties;

     (7)  Process and investigate complaints, subpoena witnesses and documents, administer oaths, receive affidavits and oral testimony, conduct contested case proceedings under chapter 91, and take other actions as necessary to exercise the commissioner's powers and duties under this chapter;

     (8)  Require each digital asset company to comply, to the same extent and in the same manner as a bank chartered by the State, with:

          (A)  Any rule, guidance, guideline, statement, supervisory policy, or any similar proclamation issued or adopted by the Federal Deposit Insurance Corporation; and

          (B)  Any policy of the Conference of State Bank Supervisors;

     (9)  Enter into agreements or relationships with other government officials or regulatory associations to improve efficiencies and reduce regulatory burden by sharing resources; standardized or uniform methods or procedures; and documents, records, information, or evidence obtained under this chapter;

    (10)  Use, hire, contract, or employ publicly or privately available analytical systems, methods, or software to investigate or examine a digital asset company or other person subject to this chapter;

    (11)  Accept and rely on investigation or examination reports made by other government officials in Hawaii or another state;

    (12)  Accept and cite in examination reports, investigation reports, or any other writings of the commissioner any  audit reports made by an independent certified public accountant for the digital asset company or other person subject to this chapter; provided that the audit and the commissioner's examination or investigation relate to the same general subject matter; and

    (13)  Enter into agreements with, hire, retain, or contract with private and governmental entities to develop educational programs relating to digital assets.

PART II.  CHARTERS

     §   -4  Charter required.  (a)  No person shall engage in digital asset business activities or hold itself out as able to engage in digital asset business activities with or on behalf of another person unless the person is:

     (1)  Chartered in the state pursuant to this chapter; or

     (2)  Exempted from the charter requirement under section     -2.

     (b)  Any transaction made in violation of this section shall be void, and no person shall have the right to collect, receive, or retain any principal, interest, fees, or other charges in connection with the void transaction.

     §   -5  Fees, fines, and penalties; disposition.  (a)  The commissioner may adopt rules specifying charter application and renewal fees; fines; penalties for violation of this chapter or any rules adopted pursuant to this chapter; or any other charges necessary to implement this chapter.

     (b)  Unless otherwise specified, all fees, fines, penalties, and other charges collected pursuant to this chapter shall be deposited with the director of commerce and consumer affairs to the credit of the compliance resolution fund established pursuant to section 26-9(o).  Payments shall be made through NMLS, to the extent authorized by NMLS.

     §   -6  Charter application.  (a)  Applicants for a digital asset charter shall apply in a form prescribed by the commissioner.  The application form shall include, at a minimum:

     (1)  The legal name, any trade names, and the business address of the applicant and, if the applicant is a partnership, association, limited liability company, limited liability partnership, or corporation, the names and business addresses of each controlling member, officer, principal, or director;

     (2)  The applicant's principal place of business in the United States;

     (3)  The address of any branch offices at which the applicant proposes to engage in digital asset business activities;

     (4)  The identity and background information required by subsection (b); and

     (5)  Any other information required by the commissioner.

     (b)  For purposes of the charter application, the applicant shall provide to the commissioner the following evidence to verify the applicant's identity and background, including, if the applicant is not an individual, the identities and backgrounds of each controlling member, officer, principal, or director:

     (1)  Fingerprints for submission to the Federal Bureau of Investigation or any other governmental agency or entity authorized to receive the fingerprints to conduct a state, national, and international criminal history background check; provided that the applicant shall pay any applicable fees for the criminal history background check; and

     (2)  Legal and financial histories, in a form prescribed by the commissioner, including authorization for the commissioner to obtain:

          (A)  An independent credit report from a consumer reporting agency, as described in section 603(p) of the Fair Credit Reporting Act (title 15 United States Code section 1681a(p)); and

          (B)  Information related to any relevant administrative, civil, or criminal findings by any government agency;

provided that the commissioner may use any information obtained pursuant to this section to determine an applicant's financial responsibility, character, and general fitness for the charter.

     (c)  The commissioner may use an agent to request information from, or distribute information to, the United States Department of Justice or any other private or governmental entity for purposes of this chapter.

     (d)  An applicant for a charter pursuant to this chapter shall not be issued the charter unless the applicant is registered with the business registration division of the department to do business in the State.

     (e)  The commissioner, by order or rules adopted pursuant to chapter 91, may waive or modify any requirement of this chapter or establish new requirements to facilitate the review of charter applications.

     §   -7  Issuance of charter; grounds for denial.  (a)  The commissioner shall review each applicant, including, if the applicant is not an individual, each controlling member, officer, principal, or director, to determine the applicant's financial responsibility, character, and general fitness for a charter.  The commissioner shall issue a charter authorizing the applicant to engage in digital asset business activities if the commissioner determines that the applicant or each controlling member, officer, principal, or director:

     (1)  Has not had a digital asset license or charter revoked in any jurisdiction; provided that, if a license or charter was revoked but the revocation was subsequently vacated, it shall not be deemed a revocation for purposes of this chapter;

     (2)  Has not been convicted of, pled guilty or nolo contendere to, or been granted a deferred acceptance of a guilty plea for a felony under federal law, the Uniform Code of Military Justice, or the laws of any state or country:

          (A)  During the seven years preceding the date of the application for a charter; or

          (B)  For a felony involving an act of fraud, dishonesty, breach of trust, or money laundering, at any time preceding the date of the application;

     (3)  Has demonstrated sufficient financial responsibility, good character, and general fitness to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly, and efficiently, pursuant to this chapter; provided that, for purposes of this paragraph, the commissioner may find an applicant not financially responsible based on:

          (A)  Outstanding financial judgments, except judgments resulting solely from outstanding medical expenses;

          (B)  Outstanding tax liens or other government liens;

          (C)  Foreclosures in the preceding three years; or

          (D)  A pattern of seriously delinquent accounts in the preceding three years;

     (4)  Has not been convicted of, pled guilty or nolo contendere to, or been granted a deferred acceptance of a guilty plea for a misdemeanor involving an act of fraud, dishonesty, breach of trust, or money laundering under federal law, the Uniform Code of Military Justice, or the laws of any state or country;

     (5)  Has satisfied the requirements of this chapter, except any requirements waived or modified by the commissioner pursuant to section     -6(e); and

     (6)  Has paid the bond required by section     -10, if applicable.

     (b)  The applicant, including each controlling member, officer, principal, or director, shall authorize the commissioner to conduct background checks in each state in which the person has conducted digital asset business activities to verify the information provided pursuant to subsection (a).  The authorization shall include consent to provide additional fingerprints, if needed, to law enforcement or regulatory bodies in other states.

     (c)  A charter shall not be issued to any applicant:

     (1)  Whose charter or license to conduct digital asset business activities was suspended or revoked in the five years preceding the application by an authority in this State or any other state or jurisdiction;

     (2)  Who has advertised to consumers or conducted transactions in the State in violation of this chapter; or

     (3)  Who has failed to submit a completed application for charter.

     (d)  A charter issued pursuant to this chapter shall remain in effect until surrendered, suspended, or revoked, or until the charter expires for failure to pay the annual charter renewal fee required by section     -10.

     §   -8  Anti-money laundering program.  (a)  Each digital asset company shall conduct an initial risk assessment that considers the legal, compliance, financial, and reputational risks associated with the company's activities, services, customers, counterparties, and geographic location.

     (b)  Based on the initial risk assessment, each digital asset company shall establish and maintain:

     (1)  An anti-money laundering program that complies with the Anti-Money Laundering Act of 2020;

     (2)  An effective customer due diligence system and monitoring program;

     (3)  Procedures for regularly screening customers against the Specially Designated Nationals and Blocked Persons lists maintained by the Office of Foreign Assets Control and any other government watchlists;

     (4)  Recordkeeping procedures for tracking any cash purchases or transactions and procedures for reporting the cash purchases or transactions to the appropriate federal regulatory agency, as required by the Anti‑Money Laundering Act of 2020;

     (5)  Procedures for monitoring and reporting any suspicious activities; and

     (6)  Policies and procedures for rejecting or blocking any transactions that violate state or federal law.

     (c)  Each digital asset company shall conduct the risk assessment required by subsection (a) annually, or more frequently to address a known risk, and shall modify the company's programs and policies as needed to comply with subsection (b).

     (d)  For purposes of this section, "customer due diligence" means the process of verifying a customer's identity and assessing the risk associated with the customer to prevent financial crimes like money laundering.

     §   -9  Cybersecurity program.  (a)  Each digital asset company shall establish and maintain a cybersecurity program to ensure the availability and functionality of the digital asset company's electronic systems and to protect the systems from unauthorized access, use, or tampering.  The cybersecurity program shall enable the digital asset company to:

     (1)  Identify internal and external cybersecurity risks by, at a minimum, identifying the information stored on the digital asset company's systems, the sensitivity of the information, and how and by whom the information may be accessed;

     (2)  Protect the digital asset company's electronic systems and the information stored on the systems from unauthorized access, use, or other malicious acts through the use of defensive infrastructure and the implementation of policies and procedures;

     (3)  Detect system intrusions, data breaches, unauthorized access to systems or information, malware, and other cybersecurity events;

     (4)  Respond to detected cybersecurity events to mitigate any negative effects; and

     (5)  Recover from cybersecurity events and restore normal operations and services.

     (b)  Each digital asset company shall implement a written cybersecurity policy setting forth the digital asset company's policies and procedures for the protection of its electronic systems and any customer or counterparty data stored on the company's systems.  The written policy shall be reviewed and approved at least annually by the digital asset company's board of directors or the equivalent governing body.  The written cybersecurity policy shall:

     (1)  Establish policies, procedures, and controls in compliance with subsection (a);

     (2)  Designate a cybersecurity officer;

     (3)  Require the development and implementation of employee training to educate employees on new and emerging cybersecurity risks and threats, to the extent appropriate for each employee's position and responsibilities;

     (4)  Establish methods for testing the digital asset company's cybersecurity systems; and

     (5)  Establish recordkeeping policies.

     §   -10  Fees; bond.  (a)  A digital asset company shall pay the following fees to the division through NMLS to obtain and maintain a valid charter under this chapter:

     (1)  An initial nonrefundable application fee of $9,000;

     (2)  An annual, nonrefundable renewal application fee of $1,000; and

     (3)  Any fees collected by NMLS for the processing of the application, including any applicable fees for:

          (A)  A criminal history background check of the applicant, including each of the applicant's control persons, executive officers, directors, general partners, and managing members, for submission to the Federal Bureau of Investigation or any governmental agency or entity authorized to receive fingerprints for a state, national, and international criminal history background check; and

          (B)  An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act (title 15 United States Code section 1681a(p)).

     (b)  Each digital asset company shall also be assessed quarterly fees based on the total value of the company's transactions in the State, measured by the United States dollar equivalent of the digital assets, as recorded in the company's quarterly reports.  The first quarterly fees shall be assessed in the quarter after the applicant obtains a charter, in accordance with the following:

     (1)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is not more than $10,000, the quarterly assessment shall be $2,500;

     (2)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $10,000 but not more than $15,000, the quarterly assessment shall be $3,750;

     (3)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $15,000 but not more than $25,000, the quarterly assessment shall be $6,250;

     (4)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $25,000 but not more than $35,000, the quarterly assessment shall be $8,750; and

     (5)  For a digital asset company where the total value of the company's transactions, measured by the United States dollar equivalent of the digital assets, is more than $35,000, the quarterly assessment shall be $12,500.

     (c)  The assessments shall be paid quarterly on February 15, May 15, August 15, and November 15 of each year, based on the digital asset company's quarterly reports as of the previous December 31, March 31, June 30, and September 30, respectively.

     (d)  Digital assets shall be based on the United States dollar equivalent of the digital assets held on behalf of customers, calculated from the company's quarterly report based on the trading price of the asset on the digital asset company's platform as of 4:30 p.m. Hawaii-Aleutian Standard Time.

     (e)  If required by the commissioner, the applicant or digital asset company shall file and maintain a surety bond that is approved by the commissioner and executed by the applicant as obligor and by a surety company authorized to operate as a surety in the State.  The surety company's liability as a surety shall not exceed, in the aggregate, the penal sum of the bond; provided that the penal sum of the bond shall be not less than $500,000, based on the annual United States dollar equivalent of the digital asset as reported in the charter application or annual renewal report.

     (f)  The bond required by subsection (e) shall run to the State as obligee for the use and benefit of the State and of any person or persons that may have a cause of action against the digital asset company as obligor under this chapter.  The bond shall be conditioned upon the following:

     (1)  The digital asset company as obligor shall faithfully conform to and abide by this chapter and all rules adopted under this chapter; and

     (2)  The bond shall pay to the State and any person or persons having a cause of action against the digital asset company as obligor any moneys that may become due and owing to the State or those persons under this chapter.

     §   -11  Renewal of charter; annual report; quarterly reports.  (a)  Each digital asset company shall file an annual report in accordance with NMLS policy.  The annual report shall include the digital asset company's most recent audited annual financial statement, including:

     (1)  Balance sheets;

     (2)  A statement of income or loss;

     (3)  A statement of changes in shareholders' equity; and

     (4)  A statement of cash flows;

provided that, if the digital asset company is a wholly owned subsidiary of another corporation, the digital asset company shall submit the consolidated audited annual financial statement of the parent company in lieu of the digital asset company's annual audited financial statement.

     (b)  Each digital asset company shall file quarterly reports, in a form prescribed by the commissioner, that shall include:

     (1)  An accounting of the digital asset company's activities in the State since the prior reporting period, including:

          (A)  The number of stored value accounts opened;

          (B)  The number of transactions processed;

          (C)  The total value of transactions, measured by the United States dollar equivalent of the digital assets;

          (D)  The number of system outages;

          (E)  A chart of accounts, including a description of each account; and

          (F)  Any other information relating to performance metrics or the efficacy of the company, as required by the commissioner;

     (2)  A report of any material changes to any of the information submitted by the digital asset company in the company's original application that has not previously been reported to the commissioner in any other report required under this chapter;

     (3)  Disclosure of any pending or final suspension, revocation, or other enforcement action by any state or government authority; and

     (4)  Any other information required by the commissioner.

     (c)  A digital asset company may renew its charter by:

     (1)  Continuing to meet the requirements of this chapter;

     (2)  Filing a completed renewal application in a form prescribed by NMLS or the commissioner; and

     (3)  Paying a renewal fee.

     (d)  If, at the time the charter renewal is due, the digital asset company has not filed an application deemed complete by the commissioner; filed an annual report and all quarterly reports; or paid the quarterly fees, the digital asset company's charter shall be suspended as of the date the renewal is due, unless the company is granted an extension of time by the commissioner.  The digital asset company shall have thirty days after the company's charter is suspended to file the missing documents or to pay the outstanding fees, plus a late filing fee of $250 for each day after suspension that the documents and fees are not made current.  The commissioner, for good cause, may reduce or suspend the late filing fee.

     §   -12  Principal place of business.  (a)  Each digital asset company shall maintain a principal place of business in the United States, regardless of whether the digital asset company maintains its principal office outside the United States.

     (b)  The digital asset company's principal place of business shall be identified in NMLS.

     §   -13  Sale or transfer of charter; change of control.  (a)  No charter granted to a digital asset company shall be transferred, except as provided in this section.

     (b)  A person or group of persons proposing a change of control of a digital asset company shall submit to the commissioner an application requesting approval of the proposed change of control, accompanied by a nonrefundable application fee of $10,000.

     (c)  After reviewing the application submitted pursuant to subsection (b), the commissioner may require the digital asset company or the person or group of persons requesting a change of control, or both, to provide additional information concerning the persons who propose to assume control of the digital asset company.  The additional information shall be limited to the types of information required of a digital asset company as part of its original charter or renewal application.  The information shall include, for the five-year period prior to the date of the application for change of control, a history of any material litigation and any criminal convictions of each person who, upon approval of the application for change of control, would be a principal of the digital asset company.  Authorization shall be given to conduct criminal history record checks of these persons, accompanied by payment of the applicable fee for each record check.

     (d)  The commissioner shall approve an application requesting a change of control under subsections (b) and (c) if the commissioner determines that the person or group of persons requesting approval has the competence, experience, character, and general fitness to control the digital asset company in a lawful and proper manner and that the interests of the public will not be jeopardized by the change of control.

     (e)  A person who:

     (1)  Acts as a proxy for the sole purpose of voting at a designated meeting of the security holders or holders of voting interests in a digital asset company or person in control of a digital asset company;

     (2)  Acquires control of a digital asset company by devise or descent;

     (3)  Acquires control as a personal representative, custodian, guardian, conservator, trustee, or as an officer appointed by a court of competent jurisdiction or by operation of law; or

     (4)  Is exempted by the commissioner,

shall be exempt from the requirements of this section; provided that the digital asset company shall notify the commissioner when control is assumed by the person.

     (f)  Before filing an application requesting the commissioner's approval of a change of control, a person may request, in writing, a determination from the commissioner as to whether the person would be considered a person in control of a digital asset company upon consummation of a proposed transaction.  If the commissioner determines that the person would not be a person in control of a digital asset company, the commissioner shall enter an order to that effect, and the proposed person and transaction shall not be subject to subsections (b) through (d).

     (g)  Subsection (b) shall not apply to public offerings of securities.

     §   -14  Ownership and control of a digital asset.  (a)  To the extent a digital asset company stores, holds, or maintains custody or control of a digital asset on behalf of another person, the digital asset company shall hold a digital asset of the same type and amount as that which is owed or obligated to that person.

     (b)  If a digital asset company violates subsection (a), the property interest the person holds in the digital asset shall be a pro rata property interest in the type of digital asset for which the person is entitled, without regard to the time the person became entitled to the digital asset or the digital asset company obtained control of the digital asset.

     (c)  The digital asset referred to in this section shall:

     (1)  Be held for the person or persons entitled to the digital asset;

     (2)  Not be considered the property of the digital asset company; and

     (3)  Not be subject to the claims of creditors of the digital asset company.

     (d)  No digital asset company shall sell, transfer, assign, lend, hypothecate, pledge, or otherwise use or encumber assets, including digital assets, stored, held, or maintained by, or under the custody or control of, the digital asset company on behalf of another person, except at the direction of that person, unless it is clearly explained to the person that the use or encumberment is the intent of the product.

PART III.  DISCLOSURES, ADVERTISING, AND RECORDKEEPING

     §   -15  Required disclosures.  (a)  A digital asset company that engages in digital asset business activities shall provide to each person using the digital asset company's products or services the disclosures required by subsection (b) and any additional disclosures the commissioner deems necessary for the protection of the company's clients.  The commissioner shall determine the required time for and form of the disclosure.  Any disclosure required by this section shall be made in writing, unless an alternate disclosure method is approved by the commissioner, and shall be issued separately from any other information provided by the digital asset company.

     (b)  Before doing business with a person, a digital asset company shall disclose to the person, to the extent applicable to the person's intended business activities:

     (1)  The amount and timing of any fees and charges the digital asset company may assess, or how the fees and charges will be calculated if the fees or charges are not established in advance;

     (2)  Whether the product or service provided by the digital asset company is covered by:

          (A)  A form of insurance or is otherwise guaranteed against loss by an agency of the United States, including the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation; or

          (B)  Private insurance against theft or loss, including cyber theft or theft by other means;

     (3)  The irrevocability of a transfer or exchange;

     (4)  The method by which the person can update the person's contact information with the digital asset company;

     (5)  That the date or time that the person initiates instructions to make a transfer or exchange may differ from the date or time when the transfer or exchange is actually completed and the person's account is debited;

     (6)  The person's right to at least thirty days' notice if the digital asset company changes its fee schedule, terms and conditions of its business activities with the person, or other policies applicable to the person's account; and

     (7)  That digital assets are not money.

     (c)  At the end of a digital asset transaction with or on behalf of a person, a digital asset company shall provide to the person, in writing:

     (1)  The name and contact information of the digital asset company, and any information the person may need to ask a question or file a complaint;

     (2)  The type, value, date, precise time, and amount of the transaction; and

     (3)  Any fees charged for the transaction, including any charge for converting a digital asset to money, bank credit, or another digital asset.

     §   -16  Tangible net worth requirement; records.  (a)  A digital asset company engaged in digital asset business activities shall maintain at all times a tangible net worth of at least $500,000, or an amount determined by the commissioner to be necessary to ensure the company's sound operations.

     (b)  Each digital asset company shall create, preserve, and make available for inspection by the commissioner the books, accounts, and other records required by subsection (c) in a form that enables the commissioner to determine whether the digital asset company is in compliance with this chapter, any relevant court order, and other laws of the State.

     (c)  For each digital asset business activity conducted with or on behalf of a person, the digital asset company shall maintain for five years after the date of the activity a record of:

     (1)  Each transaction, including the:

          (A)  Identity and address of the person and, to the extent feasible, the identity and address of any other parties to the transaction;

          (B)  Account number of the person;

          (C)  Form, amount, and date of the transaction; and

          (D)  Any payment instructions given by the person;

     (2)  The aggregate number of transactions and aggregate value of transactions with or on behalf of the person in the previous twelve calendar months, expressed in the United States dollar equivalent of the digital assets;

     (3)  Each transaction with or on behalf of the person in which the digital asset company exchanged one form of digital asset for money or another form of digital asset;

     (4)  A general ledger, posted to at least monthly, that lists all of the digital asset company's assets, liabilities, capital, income, ownership equity, and expenses;

     (5)  Each call report related to the person that the digital asset company is required by law to create or provide to the division or NMLS;

     (6)  The account number and address of each bank the digital asset company used in conducting its digital asset business activity with the person and the bank statements and bank reconciliation records for those accounts;

     (7)  If the person filed a customer complaint, any communications and documentation related to the investigation of the complaint; and

     (8)  A report of any digital asset business activity transaction with or on behalf of the person that the digital asset company was unable to complete.

     §   -17  Advertising and marketing.  (a)  No digital asset company engaged in digital asset business activities shall advertise its products, services, or activities in the State, or advertise to consumers in the State, unless the advertisement includes the name of the company and confirmation that the digital asset company is "Chartered by the State of Hawaii Department of Commerce and Consumer Affairs' Division of Financial Institutions to engage in digital asset business activity."

     (b)  Each digital asset company shall maintain for at least five years from the date of the materials' creation, and make available for examination by the commissioner, all advertising and marketing materials, including advertising or marketing through:

     (1)  Print media, including brochures;

     (2)  Digital media and internet websites;

     (3)  Television and video streaming services;

     (4)  Radio and audio streaming services; and

     (5)  Presentation materials;

provided that if material changes are made to internet or digital advertising or marketing materials, the digital asset company shall maintain screenshots or transcripts reflecting the changes.

     (c)  In all advertising and marketing materials, the digital asset company and any person or entity acting on the company's behalf shall:

     (1)  Comply with all disclosure requirements under state and federal law; and

     (2)  Avoid making, directly or by implication, any false, misleading, or deceptive representations or omissions.

     §   -18  Confidentiality.  (a)  Except as provided in title 12 United States Code section 5111, the following shall continue to apply to information and materials after the information or material has been disclosed to NMLS or any federal or state regulatory officials having authority over transactions under this chapter:

     (1)  Any federal or state law regarding the privacy or confidentiality of information or materials provided to NMLS; and

     (2)  Any privilege arising under federal or state law or the rules of any federal or state court.

     (b)  For purposes of this section, the commissioner may enter into agreements or sharing arrangements with other governmental agencies, the Conference of State Bank Supervisors, or other associations representing governmental agencies.

     (c)  Information or material that is subject to a privilege or confidentiality under subsection (a) shall not be subject to:

     (1)  Disclosure under chapter 92F; or

     (2)  Subpoena, discovery, or admission into evidence in any private civil action or administrative proceeding, unless:

          (A)  The privilege is determined by NMLS to be inapplicable to the information or material; or

          (B)  The person to whom the information or material pertains waives the privilege.

     (d)  Notwithstanding chapter 92F, investigations and examinations authorized under section     -20 and any related information and documents, including reports of the investigation or examination, shall be confidential and shall not be subject to discovery or disclosure in any civil lawsuit or criminal proceeding.

     (e)  If a conflict exists between this section and any other provision of state law relating to the disclosure of privileged or confidential information or material, this section shall control.

     (f)  This section shall not apply to information or material relating to the employment history of, or any publicly adjudicated disciplinary or enforcement actions against, any persons whose information is publicly accessible in NMLS.

PART IV.  ENFORCEMENT

     §   -19  Enforcement authority; violations; penalties.  (a)  The commissioner may take any disciplinary action specified in subsection (b) against an applicant or digital asset company if the applicant; digital asset company; or any control person, executive officer, director, general partner, or managing member of the applicant or digital asset company has:

     (1)  Violated this chapter or any rule adopted or order issued pursuant to this chapter;

     (2)  Failed to disclose facts or conditions that, had those facts or conditions been known at the time the application for charter was made, would have justified the commissioner in denying the application;

     (3)  Failed to provide within a reasonable time any information required by the commissioner;

     (4)  Failed to provide or maintain proof of financial responsibility;

     (5)  Become insolvent;

     (6)  Made in any document or statement filed with the commissioner a false representation of a material fact or omitted a material fact;

     (7)  Been convicted of or entered a plea of guilty or nolo contendre to a crime involving fraud, deceit, or any similar crime;

     (8)  Failed to make, maintain, or produce records in compliance with this chapter or any rule adopted by the commissioner pursuant to chapter 91;

     (9)  Been the subject of any disciplinary action from a state or federal agency that resulted in the revocation of a license or charter;

    (10)  Had a final judgement entered against the applicant or digital asset company for a violation of:

          (A)  This chapter;

          (B)  Any state or federal law concerning a digital asset license or charter or money transmitter license; or

          (C)  Any state or federal law prohibiting unfair or deceptive acts or practices; or

    (11)  Failed to take, or provide proof of taking, timely corrective action as required by the commissioner after an investigation or examination pursuant to section     -20.

     (b)  If the commissioner finds that an applicant or a digital asset company has committed one or more violations under subsection (a), the commissioner may:

     (1)  Deny an application for a charter or branch office;

     (2)  Suspend or revoke the charter in accordance with section     -23;

     (3)  Order the digital asset company to cease and desist from engaging in any act specified in subsection (a), in accordance with section     -24;

     (4)  Order the digital asset company to refund to customers any excess charges under this chapter; or

     (5)  Impose penalties of up to $20,000 for each violation, in accordance with section     -26.

     (c)  The commissioner may issue a temporary cease and desist order if the commissioner finds that the digital asset company, applicant, or other person subject to this chapter is engaging, has engaged, or is about to engage in an illegal, unauthorized, unsafe, or unsound practice in violation of this chapter.

     (d)  If the commissioner denies or revokes a charter or takes other disciplinary action pursuant to this chapter, the commissioner shall enter an order to that effect and notify the applicant or digital asset company of the denial, revocation, or other disciplinary action by personal service or certified mail to the last known address of the applicant or digital asset company as shown on the application or charter, or as furnished in writing to the commissioner.

     (e)  No revocation, suspension, consent order, or surrender of a charter shall impair or affect the obligations of any preexisting lawful contract between a digital asset company and a consumer.

     (f)  The commissioner may reinstate a charter, terminate a suspension, or grant a charter to a digital asset company or person whose charter has been revoked, suspended, or denied if no fact or condition then exists that would clearly justify the revocation, suspension, or denial.

     (g)  The commissioner may impose on a digital asset company, applicant, or other person subject to this chapter an administrative fine if the commissioner finds, on the record after notice and an opportunity for a hearing, that the digital asset company, applicant, or person has violated or failed to comply with any requirement of this chapter or any rule adopted or order issued under this chapter.

     (h)  Each violation or failure to comply with any directive or order of the commissioner shall be a separate violation.

     §   -20  Investigation and examination; authority.  (a)  In addition to the powers granted to the commissioner under section     -3, the commissioner may conduct investigations and examinations in accordance with this section and, for purposes of an investigation or examination, may:

     (1)  Access, receive, and use any books, accounts, records, files, documents, or information that the commissioner deems relevant to the investigation or examination, regardless of the location, possession, control, or custody of the documents, information, or evidence;

     (2)  Review, investigate, or examine any digital asset company or person subject to this chapter as often as necessary to carry out the purposes of this chapter;

     (3)  Direct, subpoena, or order the attendance of, and examine under oath, any person whose testimony may be required regarding a digital asset transaction, digital asset business activity, or any other subject matter of the investigation or examination; and

     (4)  Direct, subpoena, or order a person to produce books, accounts, records, files, and any other documents the commissioner deems relevant.

     (b)  Each digital asset company or other person subject to this chapter shall provide to the commissioner, upon the commissioner's request, any books or records relating to the company or person's digital asset business activities.  The commissioner shall also be permitted to interview the control persons, executive officers, directors, general partners, managing members, principals, managers, employees, independent contractors, agents, and consumers who may have information about the digital asset company or its digital asset business activities.

     (c)  If directed by the commissioner, each digital asset company or person subject to this chapter shall make or compile reports or prepare other information to support the commissioner's investigation or examination, including:

     (1)  Accounting compilations;

     (2)  Information, lists, or data, concerning digital asset transactions in a format prescribed by the commissioner; or

     (3)  Any other information the commissioner deems necessary.

     (d)  In conducting any investigation or examination authorized by this chapter, the commissioner may control access to any documents or records of the digital asset company or person under investigation or examination.  The commissioner may take possession of the documents or records or place a person in exclusive charge of the documents or records.  During the period of control, no person shall remove or attempt to remove any of the documents or records except pursuant to a court order or with the consent of the commissioner; provided that, unless the commissioner has reasonable grounds to believe the records or documents have been, or are at risk of being, altered or destroyed, the commissioner shall give consent for the digital asset company or owner of the documents or records to access the documents or records as necessary to conduct the company or person's ordinary business affairs.

     (e)  This section shall apply even if a digital asset company or person subject to this chapter acts or claims to act without the State's authority.

     (f)  No digital asset company or person subject to investigation or examination under this section may knowingly withhold, abstract, remove, mutilate, destroy, or conceal any relevant books, records, computer records, or other information.

     (g)  For each digital asset company or person investigated or examined under this section, the commissioner may charge an investigation or examination fee, payable to the commissioner, based upon the cost per hour, per examiner, for the investigation or examination.  The hourly fee shall be $60 or amount established by the commissioner by rule pursuant to chapter 91.  In addition to the investigation or examination fee, the commissioner may charge any digital asset company or person who is investigated or examined pursuant to this section additional fees, payable to the commissioner, for travel, per diem, mileage, or other reasonable expenses incurred in connection with the investigation or examination.

     (h)  Any person having reason to believe that this chapter, or any rules adopted or orders issued under this chapter, have been violated, or that a charter issued under this chapter should be suspended or revoked, may file a written complaint with the commissioner, setting forth the details of the alleged violation or grounds for suspension or revocation.

     §   -21  Prohibited practices.  (a)  Except as otherwise provided by law, no digital asset company, including the company's control persons, executive officers, directors, general partners, managing members, employees, or independent contractors, or any other person subject to this chapter shall, directly or indirectly:

     (1)  Engage in any act that attempts to limit or restrict the application of this chapter;

     (2)  Use a customer's digital asset account number to prepare, issue, or create a transaction on behalf of the customer without the customer's authorization;

     (3)  Charge, collect, or receive any fees for negotiating a digital asset transaction, other than fees authorized by this chapter, rules adopted pursuant to this chapter, or any other applicable state or federal law;

     (4)  Fail to make any disclosures required by this chapter, rules adopted pursuant to this chapter, or any other applicable state or federal law;

     (5)  Employ any scheme, device, or artifice to defraud or mislead any consumer or person;

     (6)  Engage in any unfair or deceptive acts, practices, or advertising in connection with a digital asset business activity;

     (7)  Obtain a digital asset by fraud or misrepresentation;

     (8)  Conduct any digital asset business activity with or on behalf of any person physically located in the State through the use of the Internet, facsimile, telephone, kiosk, or any other means, without first obtaining a charter under this chapter;

     (9)  Make a false or deceptive statement or representation to consumers, including statements regarding rates, fees, financing terms, or any other conditions placed on digital asset business activities;

    (10)  Make a false statement or knowingly omit a material fact in connection with any reports filed with the division or investigation or examination conducted by the division;

    (11)  Conduct digital asset business activities from any location not authorized by the commissioner as a principal place of business or branch office;

    (12)  Draft funds from any depository financial institution without the written approval of the consumer; provided that nothing in this paragraph shall prohibit the conversion of a negotiable instrument into an electronic form for processing through the Automated Clearing House or a similar system;

    (13)  Fail to comply with all applicable state and federal laws controlling the activities governed by this chapter; or

    (14)  Fail to pay any fee, assessment, or moneys due to the department.

     (b)  In addition to any other penalty provided for under this chapter, any digital asset transaction conducted in violation of subsection (a) shall be void and unenforceable.

     §   -22  Voluntary surrender of a charter.  (a)  A digital asset company may voluntarily cease business and surrender the company's charter by giving written notice of the intended surrender to the commissioner through NMLS.

     (b)  Notice to the commissioner shall be provided at least thirty days prior to the surrender of the charter and shall include:

     (1)  The date of the surrender;

     (2)  The name, address, telephone number, facsimile number, and electronic mail address of a person within the company having sufficient knowledge and authority to communicate with the commissioner regarding all matters relating to the digital asset company;

     (3)  The reason for the surrender;

     (4)  Information relating to the digital asset company's outstanding digital asset transactions in the State, including the:

          (A)  Total dollar amount of the digital asset company's outstanding digital asset transactions;

          (B)  Dollar amount of each outstanding digital asset transaction; and

          (C)  Name, address, and telephone number of each person with whom the digital asset company has an outstanding digital asset transaction.

     (5)  A list of the digital asset company's authorized branch offices, if any;

     (6)  Confirmation that the digital asset company has notified each of its authorized branch offices, if any, that the branch offices shall no longer conduct digital asset business activities on the company's behalf; and

     (7)  Confirmation that the digital asset company has notified each of its digital asset accounts, if any, that the digital asset account is being transferred and has provided contact information for the digital asset company or entity to which the digital asset is being assigned.

     §   -23  Suspension or revocation of a charter.  The commissioner may suspend or revoke a charter if the commissioner finds that:

     (1)  A fact or condition exists that, had it existed when the digital asset company applied for the charter, would have been grounds for denying the digital asset company's application;

     (2)  The digital asset company's tangible net worth has become insufficient and the company, after ten days' written notice from the commissioner, failed to take the steps required by the commissioner to remedy the insufficiency;

     (3)  The digital asset company has knowingly violated any material provision of this chapter or any rule adopted or order issued under this chapter;

     (4)  The digital asset company is conducting, or has conducted, its business in an unsafe or unsound manner;

     (5)  The digital asset company has become insolvent;

     (6)  The digital asset company has suspended payment of its obligations, made an assignment for the benefit of its creditors, or admitted in writing its inability to pay its debts as they become due;

     (7)  The digital asset company has filed for bankruptcy, reorganization, arrangement, or any other relief under federal bankruptcy laws;

     (8)  The digital asset company refuses to permit the commissioner to undertake an investigation or examination that is authorized by this chapter; or

     (9)  The competence, experience, character, or general fitness of the digital asset company indicates that it is no longer in the public interest to allow the company to hold a charter.

     §   -24  Orders to cease and desist.  (a)  The commissioner may issue an order requiring a digital asset company to cease and desist if the commissioner determines that the digital asset company's violation of this chapter, or a rule adopted or order issued under this chapter, is likely to cause:

     (1)  Immediate and irreparable harm to the digital asset company, the digital asset company's customers, or the public; or

     (2)  The insolvency or a significant dissipation of the assets of the digital asset company.

     (b)  An order to cease and desist shall be effective upon the service of the order and shall remain in effect pending the completion of an administrative proceeding pursuant to chapter 91; provided that the digital asset company may petition the circuit court for a judicial order setting aside, limiting, or suspending the order pending the completion of the administrative proceeding.

     (c)  The commissioner shall hold an administrative proceeding no later than twenty calendar days after issuing an order to cease and desist.

     (d)  The commissioner may also apply to the circuit court for a temporary restraining order or other injunctive relief, as necessary, to protect the public interest.

     §   -25  Consent orders.  The commissioner may enter into a consent order with a person at any time to resolve a matter arising under this chapter.  The consent order shall be signed by the person to whom the order is issued, or the person's authorized representative, and shall indicate the person's agreement with the terms of the order.  A consent order may provide that the order does not constitute an admission by the person that this chapter, or a rule adopted or order issued under this chapter, has been violated.

     §   -26  Civil penalties.  (a)  The commissioner may assess a fine against a person who violates this chapter, or a rule adopted or order issued under this chapter, in an amount not to exceed $10,000 per violation, plus the State's costs and expenses for investigating and litigating the matter, including reasonable attorney's fees.

     (b)  Any violation of this chapter that is directed toward, targets, or injures an elder may be subject to an additional civil penalty of not more than $10,000 per violation, in addition to any other fines or penalties assessed for the violation.

     §   -27  Criminal penalties.  (a)  A person who intentionally makes a false statement, misrepresentation, or false certification in a record filed or required to be maintained under this chapter, including a person who makes a false entry or omits a material entry in a record, shall be guilty of a class C felony and shall be subject to a fine of not more than $10,000.

     (b)  A person who knowingly engages in any activity for which a charter is required under this chapter without holding a charter shall be guilty of a misdemeanor and shall be subject to a fine of not more than $1,000, imprisonment for not more than one year, or both; provided that each day a violation of this chapter exists shall be a separate offense.

     §   -28  Unchartered persons.  (a)  If the commissioner has reason to believe that a person is conducting digital asset business activities without a charter, in violation of section     -4, the commissioner may:

     (1)  Issue an order for the person to show cause why the commissioner should not issue an order to cease and desist;

     (2)  Issue an order to cease and desist pursuant to section     -24; provided that an order to cease and desist shall be effective upon service of the order; and provided further that a person who is served with an order to cease a desist for an alleged violation of section     -4 may petition the circuit court for a judicial order setting aside, limiting, or suspending the order pending the completion of an administrative proceeding pursuant to section     -29; or

     (3)  If the public would be irreparably harmed by the person's continued unchartered digital asset business activities, petition the circuit court in the appropriate jurisdiction for the issuance of a temporary restraining order.

     (b)  The commissioner shall hold an administrative proceeding no later than twenty calendar days after issuing an order to cease and desist.

     §   -29  Administrative procedures.  All administrative proceedings under this chapter shall be conducted in accordance with chapter 91.

     §   -30  Hearings.  Except as otherwise provided in this chapter, the commissioner shall not suspend or revoke a charter, issue an order to cease and desist, or assess a civil penalty without providing the digital asset company, applicant, or other person subject to this chapter with notice and an opportunity to be heard.

     §   -31  Division functions.  (a)  The division shall exercise all administrative functions of the State in regulating, supervising, and issuing charters to digital asset companies.

     (b)  The division may adopt rules pursuant to chapter 91 as necessary to effectuate the purposes of this chapter."

     SECTION 3.  Section 489D-4, Hawaii Revised Statutes, is amended by amending the definition of "monetary value" to read as follows:

     ""Monetary value" means a medium of exchange, whether or not redeemable in money[.],except value defined as a digital asset under chapter     ."

     SECTION 4.  Section 846-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Criminal history record checks may be conducted by:

     (1)  The department of health or its designee on operators of adult foster homes for individuals with developmental disabilities or developmental disabilities domiciliary homes and their employees, as provided by section 321-15.2;

     (2)  The department of health or its designee on prospective employees, persons seeking to serve as providers, or subcontractors in positions that place them in direct contact with clients when providing non-witnessed direct mental health or health care services as provided by section 321-171.5;

     (3)  The department of health or its designee on all applicants for licensure or certification for, operators for, prospective employees, adult volunteers, and all adults, except adults in care, at healthcare facilities as defined in section 321-15.2;

     (4)  The department of education on employees, prospective employees, and teacher trainees in any public school in positions that necessitate close proximity to children as provided by section 302A-601.5;

     (5)  The counties on employees and prospective employees who may be in positions that place them in close proximity to children in recreation or child care programs and services;

     (6)  The county liquor commissions on applicants for liquor licenses as provided by section 281-53.5;

     (7)  The county liquor commissions on employees and prospective employees involved in liquor administration, law enforcement, and liquor control investigations;

     (8)  The department of human services on operators and employees of child caring institutions, child placing organizations, and resource family homes as provided by section 346-17;

     (9)  The department of human services on prospective adoptive parents as established under section 346‑19.7;

    (10)  The department of human services or its designee on applicants to operate child care facilities, household members of the applicant, prospective employees of the applicant, and new employees and household members of the provider after registration or licensure as provided by section 346-154, and persons subject to section 346-152.5;

    (11)  The department of human services on persons exempt pursuant to section 346-152 to be eligible to provide child care and receive child care subsidies as provided by section 346-152.5;

    (12)  The department of health on operators and employees of home and community-based case management agencies and operators and other adults, except for adults in care, residing in community care foster family homes as provided by section 321-15.2;

    (13)  The department of human services on staff members of the Hawaii youth correctional facility as provided by section 352-5.5;

    (14)  The department of human services on employees, prospective employees, and volunteers of contracted providers and subcontractors in positions that place them in close proximity to youth when providing services on behalf of the office or the Hawaii youth correctional facility as provided by section 352D-4.3;

    (15)  The judiciary on employees and applicants at detention and shelter facilities as provided by section 571-34;

    (16)  The department of corrections and rehabilitation on employees and prospective employees, volunteers, contract service providers, and subcontract service providers who are directly involved with the treatment and care of, or directly involved in providing correctional programs and services to, persons committed to a correctional facility, or placed in close proximity to persons committed when providing services on behalf of the department or the correctional facility, as provided by section 353-1.5 and the department of law enforcement on employees and prospective employees whose duties involve or may involve the exercise of police powers including the power of arrest as provided by section 353C-5;

    (17)  The board of private detectives and guards on applicants for private detective or private guard licensure as provided by section 463-9;

    (18)  Private schools and designated organizations on employees and prospective employees who may be in positions that necessitate close proximity to children; provided that private schools and designated organizations receive only indications of the states from which the national criminal history record information was provided pursuant to section 302C-1;

    (19)  The public library system on employees and prospective employees whose positions place them in close proximity to children as provided by section 302A_‑601.5;

    (20)  The State or any of its branches, political subdivisions, or agencies on applicants and employees holding a position that has the same type of contact with children, vulnerable adults, or persons committed to a correctional facility as other public employees who hold positions that are authorized by law to require criminal history record checks as a condition of employment as provided by section 78-2.7;

    (21)  The department of health on licensed adult day care center operators, employees, new employees, subcontracted service providers and their employees, and adult volunteers as provided by section 321-15.2;

    (22)  The department of human services on purchase of service contracted and subcontracted service providers and their employees and volunteers, as provided by sections 346-2.5 and 346-97;

    (23)  The department of human services on foster grandparent program, senior companion program, and respite companion program participants as provided by section 346-97;

    (24)  The department of human services on contracted and subcontracted service providers and their current and prospective employees that provide home and community‑based services under section 1915(c) of the Social Security Act, title 42 United States Code section 1396n(c), or under any other applicable section or sections of the Social Security Act for the purposes of providing home and community-based services, as provided by section 346-97;

    (25)  The department of commerce and consumer affairs on proposed directors and executive officers of a bank, savings bank, savings and loan association, trust company, and depository financial services loan company as provided by section 412:3-201;

    (26)  The department of commerce and consumer affairs on proposed directors and executive officers of a nondepository financial services loan company as provided by section 412:3-301;

    (27)  The department of commerce and consumer affairs on the original chartering applicants and proposed executive officers of a credit union as provided by section 412:10-103;

    (28)  The department of commerce and consumer affairs on:

          (A)  Each principal of every non-corporate applicant for a money transmitter license;

          (B)  Each person who upon approval of an application by a corporate applicant for a money transmitter license will be a principal of the licensee; and

          (C)  Each person who upon approval of an application requesting approval of a proposed change in control of licensee will be a principal of the licensee,

          as provided by sections 489D-9 and 489D-15;

    (29)  The department of commerce and consumer affairs on applicants for licensure and persons licensed under title 24;

    (30)  The Hawaii health systems corporation on:

          (A)  Employees;

          (B)  Applicants seeking employment;

          (C)  Current or prospective members of the corporation board or regional system board; or

          (D)  Current or prospective volunteers, providers, or contractors,

          in any of the corporation's health facilities as provided by section 323F-5.5;

    (31)  The department of commerce and consumer affairs on:

          (A)  An applicant for a mortgage loan originator license, or license renewal; and

          (B)  Each control person, executive officer, director, general partner, and managing member of an applicant for a mortgage loan originator company license or license renewal,

          as provided by chapter 454F;

    (32)  The state public charter school commission or public charter schools on employees, teacher trainees, prospective employees, and prospective teacher trainees in any public charter school for any position that places them in close proximity to children, as provided in section 302D-33;

    (33)  The counties on prospective employees who work with children, vulnerable adults, or senior citizens in community-based programs;

    (34)  The counties on prospective employees for fire department positions that involve contact with children or vulnerable adults;

    (35)  The counties on prospective employees for emergency medical services positions that involve contact with children or vulnerable adults;

    (36)  The counties on prospective employees for emergency management positions and community volunteers whose responsibilities involve planning and executing homeland security measures including viewing, handling, and engaging in law enforcement or classified meetings and assisting vulnerable citizens during emergencies or crises;

    (37)  The State and counties on employees, prospective employees, volunteers, and contractors whose position responsibilities require unescorted access to secured areas and equipment related to a traffic management center;

    (38)  The State and counties on employees and prospective employees whose positions involve the handling or use of firearms for other than law enforcement purposes;

    (39)  The State and counties on current and prospective systems analysts and others involved in an agency's information technology operation whose position responsibilities provide them with access to proprietary, confidential, or sensitive information;

    (40)  The department of commerce and consumer affairs on:

          (A)  Applicants for real estate appraiser licensure or certification as provided by chapter 466K;

          (B)  Each person who owns more than ten per cent of an appraisal management company who is applying for registration as an appraisal management company, as provided by section 466M-7; and

          (C)  Each of the controlling persons of an applicant for registration as an appraisal management company, as provided by section 466M-7;

    (41)  The department of health or its designee on:

          (A)  Individual applicants or individuals acting on behalf of applying entities for hemp processor permits as provided under section 328G-2; and

          (B)  All license applicants, licensees, employees, contractors, and prospective employees of medical cannabis dispensaries, and individuals permitted to enter and remain in medical cannabis dispensary facilities as provided under sections 329D-15(a)(4) and 329D-16(a)(3);

    (42)  The department of commerce and consumer affairs on applicants for nurse licensure or license renewal, reactivation, or restoration as provided by sections 457-7, 457-8, 457-8.5, and 457-9;

    (43)  The county police departments on applicants for permits to acquire firearms pursuant to section 134-2, on individuals registering their firearms pursuant to section 134-3, and on applicants for new or renewed licenses to carry a pistol or revolver and ammunition pursuant to section 134-9;

    (44)  The department of commerce and consumer affairs on:

          (A)  Each of the controlling persons of the applicant for licensure as an escrow depository, and each of the officers, directors, and principals who will be in charge of the escrow depository's activities upon licensure; and

          (B)  Each of the controlling persons of an applicant for proposed change in control of an escrow depository licensee, and each of the officers, directors, and principals who will be in charge of the licensee's activities upon approval of the application,

          as provided by chapter 449;

    (45)  The department of taxation on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 231-1.6;

    (46)  The department of labor and industrial relations on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 383-110;

    (47)  The department of human services on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, and on current or prospective employees, volunteers, contractors, or contractors' employees or volunteers, subcontractors, or subcontractors' employees or volunteers, whose position places or would place them in close proximity to minors, young adults, or vulnerable adults, as provided by section 346-2.5;

    (48)  The child support enforcement agency on current or prospective employees, or contractors who have access to federal tax information in order to comply with federal law, regulation, or procedure, as provided by section 576D-11.5;

    (49)  The department of the attorney general on current or prospective employees or employees or agents of contractors who have access to federal tax information to comply with requirements of federal law, regulation, or procedure, as provided by section 28‑17;

    (50)  The department of commerce and consumer affairs on each control person, executive officer, director, general partner, and managing member of an installment loan licensee, or an applicant for an installment loan license, as provided in chapter 480J;

    (51)  The department of commerce and consumer affairs on each person, control person, executive officer, director, general partner, and managing member of a digital asset company or applicant for a digital asset charter, as provided in chapter     ;

   [(51)] (52)  The university of Hawaii on current and prospective employees and contractors whose duties include ensuring the security of campus facilities and persons; and

   [(52)] (53)  Any other organization, entity, or the State, its branches, political subdivisions, or agencies as may be authorized by state law."

     SECTION 5.  (a)  Notwithstanding any other law to the contrary, a company that participated in the Hawaii digital currency innovation lab operated by the department of commerce and consumer affairs and Hawaii technology development corporation may continue conducting digital asset business activities until six months after the company's completed application for a charter is submitted pursuant to chapter     , or until the commissioner of financial institutions approves or denies the application, whichever occurs first; provided that the company shall submit a completed application for a charter no later than March 1, 2027; provided further that the commissioner, for good cause, may reduce or extend the six-month period.

     (b)  The submission of an application for charter shall be evidenced through the Nationwide Multistate Licensing System and Registry developed and maintained by the Conference of State Bank Supervisors.

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $500,000 or so much thereof as may be necessary for fiscal year 2026-2027 to establish and implement a digital asset charter program pursuant to section 2 of this Act.

     The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2026; provided that the digital asset charter requirements established by section 2 of this Act shall take effect on January 1, 2027.

 

INTRODUCED BY:	_____________________________

 

 

 

Report Title:

DCCA; Division of Financial Institutions; Digital Asset Companies; Digital Asset Charter; Appropriation

 

Description:

Establishes within the Department of Commerce and Consumer Affairs Division of Financial Institutions, beginning 1/1/2027, a digital asset charter program for licensing, regulating, and overseeing digital asset companies and digital asset business activities.  Authorizes companies that participated in the Hawaii Digital Currency Innovation Lab to temporarily continue digital asset business activities without a charter in certain circumstances.  Appropriates moneys.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.