The state of Hawaii has taken a significant step into the cryptocurrency world by completing the regulatory sandbox put in place by the state’s Department of Commerce and Consumer Affairs and Technology Development Corporation (HTDC) in 2020.
Government agencies released a statement indicating that the cryptocurrency regulatory sandbox in Hawaii, called the Digital Currency Innovation Lab (DCIL), was ending on June 30 of this year.
This sandbox provided an experimental and controlled regulatory space that allowed companies in the cryptocurrency industry to operate and do business within the state without having a money transmission license. Through the sandbox, agencies sought to explore the activities and opportunities of the crypto market, as well as gather data and information necessary to design a fair legal framework tailored to the needs of this innovative and growing industry.
Now that this sandbox has ended, it appears that cryptocurrency companies will still not need a state money transmitter license to operate in Hawaii. However, they will still need to comply with established federal regulations, the statement reads. release.
Cryptocurrencies, an economic engine for Hawaii
HTDC Acting Executive Director Len Higashi said Hawaii’s Digital Currency Innovation Lab (DCIL) provided new opportunities to build on the progress the state had made in cryptocurrency and blockchain technology.
“DCIL has proven to be an economic driver and we recognize the potential it brings to Hawaii’s future.”, Higashi said in a statement released in 2022.
DCIL was a 2-year pilot program, established in the state of Hawaii in August 2020, with the goal of creating and exploring new economic opportunities at the state level through cryptocurrencies.
According to the state’s Technology Development Corporation, early adoption of cryptocurrencies and digital assets can significantly accelerate Hawaii’s development and growth.
But in addition to exploring new economic opportunities, the state’s regulatory sandbox also sought to offer protection to cryptocurrency consumers and provide guidance to digital currency issuers. The sandbox was also designed to gather necessary data and information to shape legislation that supports the growth and development of cryptocurrencies and digital assets within the state.
The sandbox was originally scheduled to operate until June 30, 2022. However, the agencies announced the extension of this regulated space until June 30, 2024.
In total, 11 cryptocurrency companies participated in the DCIL, and HTDC said they will continue to serve Hawaii residents after the regulatory sandbox ends.
An attractive place for cryptocurrency innovation
The cryptocurrency community has reacted in a variety of ways to the conclusion of this collaborative regulated space. Some see this as an exceptional opportunity to establish greater collaboration between the cryptocurrency industry and federal authorities, while others fear that intervention by government agencies could affect innovation and competitiveness in the state.
Now that the sandbox has been lifted, crypto businesses operating in the state will need to focus on complying with existing regulations to mitigate risks with crypto assets, including requirements set by the Financial Crimes Enforcement Network (FinCEN), the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA), among others.
On the other hand, after the conclusion of the sandbox, Hawaii is expected to continue to be an attractive location for the development of cryptocurrency and blockchain technology companies and to continue to drive innovation. In 2021, the state introduced a bill focused on promoting blockchain as an innovative technology that will revolutionize current models.
