Bitcoin exchange service providers have to keep evolving their business model at all times. In some cases, this also means dealing with unexpected changes. For the Coinbase team, one of those changes revolves around no longer serving customer sin Hawaii. This news came as quite a surprise, although it was to be expected given some recent regulatory changes in the state.
Coinbase Exits Hawaii Market
Regulators can only control exchanges dealing with bitcoin, rather than cryptocurrency itself.In the state of Hawaii, some recent changes regarding finance and bitcoin have forced Coinbase to halt its services in that region. In September of 2016, the Hawaii Division of Financial Institutions imposed new requirements for any company dealing with customer funds.
Part of these new requirements forces companies to hold cash reserves equal to digital currency-nominated funds held for its users. In the case of Coinbase, holding such vast sums of money can prove to be rather challenging, to say the least. Moreover, the costs associated with doing so would quickly outweigh any profits the company can generate from this business model. For the time being, Coinbase customers in Hawaii can still use the service, but they will be forced to close down the account in the coming 30 days. Any funds in the balance will need to be removed as well.
As one would expect from such a harsh decision, the canvas will halt user registration for Hawaii customers as well. It is possible the exchange will reopen their service in the US state in the future, assuming regulatory conditions improve. Right now, that seems highly unlikely. That is unless the state’s legislature will embrace the newly announced blockchain working group. It remains unclear if and when this will happen, though.
Coinbase will continue to collaborate with policymakers in Hawaii to establish an ecosystem where bitcoin companies can thrive. These harsh financial requirements pose a big challenge to exchanges, as they are forced to hold twice the “reserves” traditional institutions do. It seems unfair to treat cryptocurrency companies this way, although this is the way things are right now, unfortunately.
Hawaii is not the first US state where Coinbase is forced to halt their services as of late A similar incident occurred in Wyoming in 2015 when the company had to shut down due to similar regulatory concerns. Requiring steady cash reserves for companies dealing with cryptocurrency deposits on behalf of customers has become somewhat of a “fan favorite” among regulators these days.
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