Hawaii is renowned for many vacation destinations appealing to visitors from around the world. As the coronavirus epidemic continues to wreak havoc in many sectors of the global economy, governments and policymakers are looking for alternatives to stay afloat.
On March 17, the governor’s office of Hawaii announced its new ‘Digital Currency Innovation Lab,’ which is a crypto and blockchain incubator. It is developed via extensive collaboration between the state’s Division of Financial Institution (DFI), Department of Commerce and Consumer Affairs, and the Hawaii Technology Development Corporation (HTDC).
This initiative is set to run for the next two years enabling all the:
“Digital currency issuers to do business in Hawaii without obtaining a state money transmitter license during the effective period of the pilot program.”
By using this program, Hawaii strives to get a more in-depth perspective of digital currencies. It will also be used to inform future crypto regulation in the state.
Sandbox Participants Will Not Encounter Action Against Illegal Money Transmission
Hawaii’s commissioner of financial institutions, Iris Ikeda, has insisted that the DFI has published a no-action message. It prevents regulatory consequences for the companies that will operate under the sandbox who are found to engage in what would usually be considered as unlicensed money transmission activities. Ikeda commented:
“DFI is leveraging its statutory authority to provide an innovative way to introduce digital currency issuers into the State of Hawaii while ensuring the safety of our consumers. By acknowledging digital currencies as a transmission vehicle of the future; we will be able to craft legislation that is conducive to its development in Hawaii.”
The acting executive director of the HTDC, Len Higashi, said that he is hopeful that the program will enable Hawaii to:
“Position itself at the forefront of financial technology and potentially reap the economic benefits that accompany the leadership stance taken.”
All the interested companies and entities have until May 1 to apply for this program. They are required to pay a $500 application fee together with $1,000 for every term of participation.
Hawaii Turns to Crypto for the First Time Since 2017
Hawaii introduced the double-reserve requirement in 2017. That requirement mandated that all companies and firms operating with cryptocurrencies to hold an equal sum of fiat and their clients’ crypto holdings.
Crypto firms were not banned from operating in the state. But, this regulation pushed many blockchain companies operating in the region elsewhere. During that time, even the U.S.-based crypto exchange Coinbase left.
The Future is Still Clouded for Crypto in Hawaii
Although the HTDC website notes that this sandbox was developed to address the concerns of firms deterred by the double-reserve requirement, it is still unclear what Hawaii’s vision for the blockchain and crypto industries is after this sandbox program ends.
The website says that after the two-year program elapses:
“Participants must conclude all digital currency transactions unless explicit approval has been granted. DFI will determine the appropriate licensing for the company to continue operations, if applicable.”
In the past week, Rhode Island also created a regulatory sandbox. The sandbox is designed to support innovation within the crypto and blockchain spaces.