Hawaii is now reconsidering its stance towards the cryptocurrency industry after seeing major cryptocurrency exchange Coinbase flee citing’ untenable’ cryptocurrency regulations. On March 17Hawaii’s governor’s office announced its new’ Digital Currency Innovation Lab,’ a blockchain technology and digital currency incubator.
In addition, the new incubator was built through a collaboration between Hawaii’s Department of Commerce and Consumer Affairs, Financial Institution Division (DFI) and the Hawaii Technology Development Corporation (HTDC).
The new verve will run for a period of 2 years and will authorize the issuance of virtual currencies to run businesses in Hawaii without obtaining a state license during the pilot period. Using this program, the Hawaii authorities aim to obtain a comprehensive view of cryptocurrencies; and to develop a future regulatory framework for digital assets in Hawaii.
Sandbox participants unsusceptible to penalties against unlicensed money transmission
Moving forward, Hawaii’s Commissioner for Financial Institutions, Iris Ikeda, stressed that the DFI had submitted a no-action communication to ensure that firms operating under the sandbox are exempt from taking action against unlicensed money transmission activities.
“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.”
On the other hand, the acting executive director of the HTDC, Len Higashi voiced his optimism about the initiative. He stated that it will enable the island to “position itself at the forefront of financial technology and potentially; reap the economic benefits that accompany the leadership stance taken.”
Companies interested in participating in the sandbox were advised to apply before 1 May, pay a $500 application fee in addition to $1,000 for each participation term.
Back in 2017, the government introduced double-reserve requisite ratifying companies operating within the digital assets space to hold traditional currency equal to their client’s cryptocurrency holdings.
Despite not banning cryptocurrency firms from operating in the field, this regulation pushed many blockchain firms away. American cryptocurrency exchange Coinbase is among the companies to move.
The future regulatory framework still blur in Hawaii despite sandbox
The HTDC website points out that a sandbox has been created to address the concerns of firms, which are dissuaded by the regulatory need for a double reserve. However, this is still not enough as it does not clearly show; the Hawaii plans for the digital currency and blockchain space in the country after the pilot is over.
In addition, the website indicates that after the conclusion of the pilot program; all the participants must close all crypto transactions unless absolute consent has been given. Moreover, it stated that the DFI will regulate the suitable licensing for companies to progress with the work.
Ultimately, the digital sandbox is an effort to steer future regulations. The intuition gathered within the two years may open further opportunities for digital currencies as per Len Higashi. He also stated that the sandbox has the ability to place Hawaii amidst the earliest adopters of virtual currencies.