Coinbase recently announced that Hawaii residents can now buy, sell and manage cryptocurrencies through its platform, as well as pledge assets and transfer funds internationally. This move is due to recent regulatory changes made by the Division of Financial Institutions (DFI) of the Hawaii Department of Commerce and Consumer Affairs, which provides clearer guidance for cryptocurrency companies. According to data from The Block, Coinbase's cryptocurrency trading volume in July 2023 was close to $64 billion.
Coinbase previously withdrew from the Hawaiian market in 2017 due to regulatory requirements at the time that required the company to maintain a one-to-one cash reserve for its Bitcoin holdings. This policy made it “impossible” for the company to continue operating in the state.
However, three years later, the Hawaii Division of Financial Institutions (DFI) partnered with the Hawaii Technology Development Corporation (HTDC) to launch the Hawaii Digital Currency Innovation Lab (DCIL), a regulatory sandbox program that allows 12 companies, including Gemini, Robinhood, and BlockFi, to provide cryptocurrency services in Hawaii for two years without obtaining a state money transmission license.
Although the Hawaii Digital Currency Innovation Lab ended on June 30, 2024, cryptocurrency companies can continue to operate in Hawaii as unregulated businesses, but they will be responsible for complying with any applicable federal licensing or registration requirements, including with the Financial Crimes Enforcement Network, the Securities and Exchange Commission and the Financial Industry Regulatory Authority, as well as any relevant federal regulatory requirements involving consumer protection, anti-money laundering measures, etc. This means that these companies still need to operate in compliance with federal regulations when conducting digital currency transactions.
1. Compliance work at the U.S. level
According to Aiying, Coinbase's compliance in the United States is very comprehensive, and it holds a variety of key licenses, enabling it to operate legally at the state and federal levels. The following are Coinbase's current major compliance situations and licenses in the United States:
Money Transmitter License (MTL): Coinbase holds money transmitter licenses in most states in the United States. These licenses cover cash balances and transfers in US dollars, and in some states also apply to cryptocurrency balances and transfers, such as New York (requires BitLicense, which also applies to cryptocurrency), Washington, Connecticut, and Minnesota. However, some states do not require a money transmitter license for cryptocurrency businesses, such as Texas and Montana.
Money Services Business (MSB) Registration: Coinbase is registered with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) as a “Money Services Business,” which means it must comply with several financial services and consumer protection laws, including the Bank Secrecy Act and the USA PATRIOT Act.
BitLicense: Coinbase was one of the first companies to receive a BitLicense from the New York State Department of Financial Services (NYDFS), which allows it to legally operate a cryptocurrency business in New York State.
Commodity Futures Trading Commission (CFTC): Coinbase recently received approval from the Commodity Futures Trading Commission (CFTC) to offer federally regulated cryptocurrency futures trading in the United States to qualified customers.
2. Global Compliance
According to Aiying, Coinbase has taken a number of compliance measures around the world, and has obtained a number of key licenses, in addition to the United States, to ensure its legal operations in different jurisdictions. The following is Coinbase's compliance status and licenses in major global markets:
1. United Kingdom:
Coinbase is authorized by the Financial Conduct Authority (FCA) in the UK to issue electronic money (e-money) and provide payment services under the Electronic Money Regulations 2011. This means that Coinbase can legally provide a variety of financial services in the UK, including cryptocurrency trading. Read more about the UK's new measures for crypto assets in 2023: the new framework and its impact.
2. European Union:
Registered as an electronic money institution in Ireland and regulated by the Central Bank of Ireland. Through this registration, Coinbase is able to provide cryptocurrency trading and related services throughout the EU. Irish registration also makes Coinbase's operations in the EU comply with the requirements of the EU Fifth Anti-Money Laundering Directive (5AMLD).
It has obtained a license from the German Federal Financial Supervisory Authority (BaFin) in Germany, which enables it to legally provide cryptocurrency trading and custody services in Germany. BaFin is Germany's main financial regulator, responsible for supervising the country's banks, financial service providers, insurance companies, and cryptocurrency companies, etc.
Obtained a license from the French Financial Markets Authority (AMF) to provide digital asset services in France. This includes cryptocurrency trading, custody and payment services. The AMF is the main financial regulator in France, responsible for supervising and regulating financial markets and their participants.
Registered as a cryptocurrency service provider in Italy and approved by the country’s financial regulator. Italy’s compliance requirements include anti-money laundering (AML) and customer identity verification (KYC) measures
In the Netherlands, Coinbase has obtained a license to operate in the country through registration with the Dutch Central Bank (DNB). This allows Coinbase to provide cryptocurrency trading and custody services and must comply with the Netherlands' strict financial regulatory regulations.
In Spain, it passed the review of the local financial regulator and obtained a license to operate legally in the Spanish market. Spain's regulatory framework requires cryptocurrency service providers to comply with anti-money laundering and data protection regulations.
As the Markets in Crypto-Assets Regulation (MiCA) is about to take effect on June 30, 2024, member states are adjusting their respective regulations and regulatory frameworks to comply with MiCA standards. Some countries have begun training regulators for the implementation of MiCA and establishing technical infrastructure to support the implementation of new regulations. The European market's regulatory standards for the crypto industry will also tend to be unified, without the need for multi-country applications, thereby reducing the current high compliance costs of many Wed3 institutions.
3. Singapore:
Coinbase is regulated by the Monetary Authority of Singapore (MAS) in Singapore and has applied for a license under the Payment Services Act, which will allow it to legally provide payment services including cryptocurrency trading in Singapore. [Long Article and Illustrations] A Comprehensive Interpretation of Singapore's Payment Business Regulatory Framework and Virtual Asset DPT License Requirements]
4. Japan:
Coinbase has obtained a license from the Financial Services Agency (FSA) in Japan to provide cryptocurrency trading services in Japan. This is because Japan's regulation of cryptocurrencies is extremely strict, and obtaining this license means that Coinbase's operations in this market are fully compliant.
5. Australia:
Coinbase is registered as a digital currency exchange service provider in Australia and is regulated by the Australian Transaction Reports and Analysis Centre (AUSTRAC). This registration enables it to legally provide cryptocurrency exchange and other related services in Australia.
Reference Information:
https://www.coinbase.com/en-gb/blog/coinbases-global-expansion-leading-the-compliant-international-charge-into
https://cca.hawaii.gov/dfi/news-releases/release-hawaii-digital-currency-innovation-lab-to-conclude/
https://www.htdc.org/state-of-hawaiis-digital-currency-innovation-lab-extended-to-june-30-2024/
https://cca.hawaii.gov/dfi24/digital-currency-innovation-lab/
