Aloha, Bitcoin: Hawaii Ends Crypto Licensing Pilot, Creating Unregulated Industry
The state of Hawaii has made a surprising move by discontinuing its digital currency licensing pilot, leaving the cryptocurrency industry unregulated. This decision comes as a stark contrast to Hawaii’s previous reputation as one of the least crypto-friendly states in the US, second only to New York.
In a recent news release from the governor’s office, it was announced that digital currency companies will no longer be required to obtain a Hawaii-issued money transmitter license to conduct business within the state. Instead, these companies will be allowed to operate as unregulated entities, with the responsibility of complying with federal licensing or registration requirements.
This change in regulatory stance comes after years of debate, failed attempts at legislation, and difficulties in finding a middle ground between regulation and innovation. The state’s financial regulator, the Division of Financial Institutions (DFI), had previously classified cryptocurrency exchanges as money transmitters, subjecting them to stringent reserve requirements that made doing business in Hawaii nearly impossible.
To address the impasse, the DFI collaborated with the Hawaii Technology Development Corporation (HTDC) to establish a Digital Currency Innovation Lab (DCIL). The pilot program created a regulatory sandbox where exchanges could temporarily operate in Hawaii without fear of regulatory action, in exchange for sharing data on their transactions.
While the DCIL pilot saw participation from 16 digital currency companies, the state was still unable to establish a clear licensing framework for crypto companies. Several bills were introduced in the state legislature, but none were successful in providing a regulated yet favorable environment for the crypto industry.
As a result, the state has decided to end the pilot and leave the regulation of the cryptocurrency space to the federal government. This move is seen as a commitment to striking a balance between innovation and regulatory responsibility. The decision has left Hawaii’s crypto industry in a state of uncertainty, but it remains to be seen how this will impact the overall crypto landscape in the Aloha State.