Hawaii is at a critical juncture. We must decide whether we will embrace one of the most transformative and promising new technologies in the world or continue to allow outdated regulations to prevent residents from taking part in the next economic revolution.
The state Legislature is now considering a number of proposed bills aimed at lowering legal barriers to Bitcoin and other digital currencies — or removing them altogether.
Three bills had their first committee hearings Monday. Three more are being heard today. Any and all of these bills need public testimony — for, against or commentary — to demonstrate to our lawmakers that there is interest in crypto and digital currencies.
We should be more than interested. We should demand a robust debate and decisive action, and hopefully pull Hawaii out of the dark ages.
What’s so important about this legislative session?
As I explained in an earlier column (808ne.ws/35I3fHR), Bitcoin and other cryptocurrencies are not illegal in Hawaii. But we currently classify digital currency exchanges as “money transmitters” like Western Union, a licensing model so onerous that most of the largest and reputable providers refuse to serve Hawaii customers.
For everyday citizens, exchanges like Coinbase, Binance, Kraken and Gemini are the primary onramp to the crypto world, making it easy to convert U.S. dollars to digital currencies like Bitcoin, Ethereum, Tether, Cardano, Solana and XRP.
Several earlier attempts to pass legislation to allow these companies to operate in Hawaii have failed. But the state Division of Financial Institutions joined forces with the Hawaii Technology Development Corp. to launch the Digital Currency Innovation Lab in 2020.
The DCIL is a two-year pilot program that allowed a vetted set of companies to serve isle residents without fear of regulatory action, in exchange for providing data on their Hawaii operations.
More than a dozen companies enrolled, and to date they’ve served over 62,000 Hawaii residents, who’ve collectively initiated more than $450 million in transactions.
But without a change to Hawaii law, the DCIL expires June 30. And if that happens, participating exchanges will have to close the accounts of Hawaii customers, setting Hawaii back to where it was five years ago.
And now that crypto is mainstream, adopted officially by other state and national governments, Hawaii’s restrictions would amount to a roadblock that’s 50 feet high and 10 feet wide, easy to get around if you’re willing to stray a little off the path.
To be sure, there are skeptics who feel cryptocurrencies are a fad at best or the realm of hucksters and scammers at worst. And with the explosive popularity of nonfungible tokens, or NFTs, even some tech experts are pushing on the brakes. Consumers will need to do their research and invest cautiously. But Hawaii residents should have the option to participate.
“We’re not advocating that crypto replace existing traditional financial infrastructure; we just want to make sure our people are not left behind, to give people a choice,” said state Sen. Bennette Misalucha, who worked with state Sen. Glenn Waikai and state Rep. Patrick Branco on several of the bills introduced this session.
Notably, Misalucha comes from a banking background, and was even a financial course classmate of DFI Commissioner Iris Ikeda, whom she commends for diligently managing and developing state policy.
“Crypto commerce is here to stay; the genie’s out of the bottle, and we can’t put it back,” she adds. “We have to make sure we balance protecting the interests of our constituents with giving them the opportunity to invest.”
Today’s hearings will address Senate Bill 3025 (with House counterpart HB 2384) and HB 2108 (SB 3076), which would replace the DCIL with a formal digital currency licensing program.
Other bills to watch? SB 2697 and HB 2287 would exclude digital currency exchanges from the current money transmitter law. SB 2695 calls for a blockchain and cryptocurrency task force. SB 2696 would allow state agencies to accept virtual currency payments. And SB 2698 would amend the state Constitution to guarantee the right to own and use “any medium of exchange.”
Some of these proposals are more aggressive than others, and Misalucha acknowledges that it might take time for policymakers and the public to get used to new ideas.
“Crypto has been likened to early days of the internet. It’s the wave of the future,” she notes. “You need to be careful, but as you learn more, you cannot help but get excited about the possibilities.”
———
Ryan Kawailani Ozawa is a community engagement specialist for the Digital Currency Innovation Lab, an independent technology consultant and a journalist.
