Regulators in Hawaii have launched a digital currency sandbox initiative that exempts from Hawaii’s infamous double-reserve requirement for participating crypto companies.
According to a press release, the “Digital Currency Innovation Lab” by 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 cryptocurrency laws.
It may also be the beginning of the end for the most restrictive state-level crypto licensing regimes left in the United States.
Hawaiian Crypto Businesses Not Banned
DFI never banned Hawaiian crypto-businesses. But when the regulator decided in 2017 that companies held just as much fiat as their clients held crypto – the “double-reserve” requirement – previously licensed crypto companies, including Coinbase, the state fled arguing that the mandate was irrational, untenable and bad for consumers.
DFI now appears to acknowledge its bar was too high. HTDC writes in the FAQ of the sandbox initiative that DFI “wanted to address the concerns” of businesses that couldn’t meet the regulatory requirements.
A spokesman for DFI confirmed that the sandbox does away with the requirement for double reserve.
DFI had promised not to take action against participants in the sandbox, the press release said.
“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, said in the press release.
Ikeda further stated that the sandbox would allow regulators to “craft legislation conducive to the development of [cryptocurrencies] in Hawaii.”
According to the press release, Hawaii’s sandbox is not a free-for-all regulation. For each participating term, prospective companies must apply for entry via HTDC and pay an application fee of $500, plus $1,000. Companies have to apply until 1st May.