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It is now legal for cryptocurrency exchanges to do business with Hawaiian consumers under a two-year pilot project that began on Wednesday.
A dozen digital currency issuers have been selected to participate in the program formed by two state agencies.
State officials said the new “Digital Currency Innovation Lab” program aims to position Hawaii as a place where financial technology, or fintech, can thrive in a way that leads to new economic opportunities while protecting consumers from the risks associated with digital currencies such as like Bitcoin, Dogecoin, Ethereum, Litecoin, ZCash and others.
“Hawaii-based consumers can expect a variety of options for the services offered by digital currency companies in the state,” Iris Ikeda, state commissioner of financial institutions, said in a statement. “I plan to take this opportunity for our state to develop a solid understanding of one of the most exciting areas of fintech.”
The pilot project also aims to provide information on how to revise state legislation to enable the industry to develop and operate under fair and safe regulations.
Cryptocurrency exchanges had effectively been barred from doing business in Hawaii since 2016 when the Financial Institutions Division, part of the State Department of Commerce and Consumer Affairs, interpreted state law governing money transfer companies as applying to virtual currency brokers. This interpretation subjected cryptocurrency brokers to overly burdensome license and asset reserve requirements.
This law, according to a 2018 statement by an industry supporter, made Hawaii the only state where consumers could not redeem virtual currency.
Under the new program created by the DCCA and Hawaii Technology Development Corp., the 12 brokerage firms are allowed to do business without complying with the law, although they are overseen by the Financial Securities Division and must report transaction data and customer complaints. at the agency.
The 12 participating companies, which were selected from 19 applicants, include Facebook-owned entity Novi Financial, popular equity investment app Robinhood, and Maui-based Cloud Nalu.
Apex Crypto, bitFlyer USA, BlockFi Trading, CEX.IO, Coinme, ErisX, Flexa Network, Gemini Trust Co. and River Financial complete the group.
Tokyo-based bitFlyer’s U.S. subsidiary said it had been operating in Aloha state since Wednesday.
“We are pleased to partner with the State of Hawaii to bring our world class services here,” Joel Edgerton, chief operating officer of bitFlyer USA, said in a statement. “Now residents of Hawaii have access to an approved and trusted exchange to support their Bitcoin and cryptocurrency exchanges.”
Hawaiian regulators are concerned that the industry is harming consumers.
Two years ago, the Financial Institutions Division backed a bill in the legislature that would have required virtual currency brokers to warn Hawaiian consumers: “Most virtual currencies are based on computer cryptography and pull their value only from the market’s perception of their value. , who can experience big swings. … You should be aware that as a consumer you have the possibility of losing all of your virtual currency. “
This bill, which would have amended the regulations on issuers of digital currency, was not adopted.
Now, the pilot program is expected to help shape future regulations for cryptocurrency trading in Hawaii.
“DFI is leveraging its statutory authority to provide an innovative way to bring digital currency issuers into the state of Hawaii, while ensuring the safety of our consumers,” Ikeda said in a statement in March announcing plans for the program. “By recognizing digital currencies as a transmission vehicle of the future, we can craft legislation conducive to its development in Hawaii.”
Len Higashi, Interim Executive Director of High Technology Development Corp., added, “By leading the Digital Currency Innovation Lab, Hawaii can position itself at the forefront of financial technology and potentially reap the economic benefits that come with being a leader. leadership adopted. Thanks to the (laboratory), we hope to identify opportunities for economic development through this effort and (are) very optimistic about our ability to do so.
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