Hawaii’s Department of Commerce, Division of Financial Institutions (DFI), and the Hawaii Technology Development Corporation (HTDC) will provide “selected” firms with a two-year reprieve from Hawaii’s state money transmitter license requirement, as the state begins to develop new digital currency legislation.
The relief will be provided though Hawaii's “Digital Currency Innovation Lab” and could potentially signal the beginning of the end for what has been regarded as the most restrictive state-level digital currency licensing regimes in the U.S.
Although the DFI never actually banned digital currency businesses in Hawaii, in 2017, the DFI imposed a restrictive policy which set Hawaii apart from nearly every other state in America. The policy provided that digital currency businesses were to maintain cash reserves (or similar, liquid assets referred to as “permissible investments”) in an amount equal to the aggregate face value of digital currency funds held on behalf of customers. Major crypto players such as Coinbase, left the State as a result, arguing that the mandate was irrational, untenable and bad for consumers.
DFI has since re-positioned this hard stance, addressing the concerns of business who could not meet the regulatory requirements in a recently released FAQ.
A DFI spokesman confirmed that the new sandbox does away with the double reserve requirement, saying:
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.
Iris Ikeda, Commissioner of Financial Institutions, further stated in the press release
that the sandbox would allow regulators to “craft legislation that is conducive to [digital currency] development in Hawaii.”
Hawaii’s sandbox should not be considered a regulatory free-for-all, since prospective companies must apply for entry via the HTDC and pay a $500 application fee, on top of a payment of $1,000 for each participating term. This is a promising step towards introducing crypto at a greater scale in a region where digital currency developments have been quite stagnant in recent years.
This latest development follows renewed enthusiasm for limited scope regulatory sandboxes all over the world, with France recently proposing a new Europe-wide sandbox, and Australia expanding its regulatory sandbox.