Virtual currency is legal in Hawaii.
The Aloha State has consistently earned near-worst reputations in the nation for being unfriendly toward digital currencies, second only to New York, the state with the BitLicense that Hawaii sought to adapt and implement.
However, in a news release quietly posted by the governor’s office last week, the state government clarified that “digital currency companies do not require a Hawaii-issued money transfer license to conduct business in the state.”
“Both companies will be able to continue their trading activities as unregulated businesses,” the announcement continued. “However, such companies are responsible for complying with any applicable federal licensing or registration requirements.”
In other words, Hawaii’s regulatory stance suddenly changed from strict to “lax”.
Whether to obtain a license
The policy change comes after years of debate, research, and the sudden failure of attempts at amendments in the state Legislature. Hawaii’s financial regulator, the Department of Financial Institutions (DFI) under the Hawaii Department of Commerce and Consumer Affairs, has long maintained that cryptocurrencies, particularly virtual currency exchanges, fall under its jurisdiction. This jurisdiction is based on classifying crypto exchanges such as Coinbase and Binance as money transmitters, placing them in the same regulatory bucket as companies such as Western Union.
However, Hawaii imposes strict reserve requirements on money transfer companies. This means that cryptocurrency exchanges must hold cash reserves equal to their digital holdings. Such policies make catastrophic failures like FTX less likely, but they also make it impossible to conduct business on the island.
Most major exchanges refused service to customers in Hawaii.
To address this impasse, DFI partnered with the Hawaii Technology Development Corporation (HTDC) to establish the Digital Currency Innovation Lab (DCIL). The pilot program created a regulatory sandbox where exchanges could temporarily serve customers in Hawaii without fear of regulatory action, in exchange for providing data on businesses that ended up transacting in the state. .
More than 30 digital currency companies applied, 16 were accepted into the program, and 12 of them ultimately participated in the launch of the pilot program in 2020. Meanwhile, states have begun developing licenses specifically for virtual currency companies.
Even within the regulatory sandbox, Hawaii has managed to register a significant amount of activity on participating exchanges, serving as many as 146,000 customers and transacting $284 million in one quarter. going.
Hawaii has not been immune to cryptocurrency scammers either.
battle of banknotes
Hawaii residents and policymakers were eager to open Hawaii to the explosive growth and economic potential of cryptocurrencies. This is 2000, the price of Bitcoin is rising towards $10,000, and has yet to reach its $64,000 peak (or subsequent crash), easing blocks on the financial blockchain or Various bills have been introduced in state legislatures to remove it.
The DFI-authored bill was the only bill to pass both the state Senate and House of Representatives. But testimony was divided.
While most agreed that some regulation was needed, opponents said the proposed crypto license (modeled after New York’s BitLicense) was too burdensome. Like the bill that would have extended the DCIL pilot, this bill died before reaching the governor’s desk. In the aftermath, the state encouraged customers of experimental cryptocurrency exchanges to sell their holdings.
I was at a loss
Ultimately, the state unilaterally extended the pilot for an additional two years before it expired in 2020. Most participating companies continued with the program. However, the next Congress, which introduced several bills in the field of digital currencies, once again allowed virtual currencies but failed to create a definitive framework to regulate them.
Despite 2022 being a disastrous year for cryptocurrencies, the pilot has been extended for another two years until June of this year. And last month, the most recent session of the Hawaii State Legislature convened without a virtual currency bill being considered.
DFI and HTDC jointly announced the end of the pilot and confirmed that the state of Hawaii will hand over control of the cryptocurrency space to the federal government. “The signing of the DCIL is a milestone that reflects our commitment to balancing innovation and regulatory responsibility,” DFI Commissioner Iris Ikeda said in a statement. Decryption At the time of writing.