Coinbase Shuts Down Bitcoin Services in Hawaii, Rejecting Regulator’s Cash Reserve Request

Digital currency exchange Coinbase announced today that due to changes in Hawaii state regulatory policies, the company will stop providing services to Hawaii users within 30 days.

The startup said that in September last year, they were told by Hawaiian financial institutions that they needed to hold cash reserves for consumers in any digital currency. Coinbase said that this requirement caused them to increase cost pressure, so Coinbase asked Hawaiian users to close their accounts and transfer all funds from Coinbase's storage service within the next 30 days.

Additionally, Coinbase said it will stop registering new users from Hawaii, a policy that will continue “indefinitely” due to regulatory concerns.

However, Coinbase hinted that it might reopen services in Hawaii if the regulatory environment improves, pointing to recent efforts to create a blockchain working group in the state legislature as a positive development.

Coinbase also stated:

“While this is just a small comfort to Hawaii users, Coinbase hopes to work with policymakers to change the law or encourage regulators to re-examine existing policy discretion in Hawaii. We have heard that members of the Hawaii State House of Representatives recently introduced a bill to establish a digital currency and blockchain working group.”

This is not the first time Coinbase has shut down services due to regulatory concerns. In June 2015, Coinbase also shut down services in Wyoming when the state banking department required the exchange to provide an equivalent amount of cash reserves.