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Could Hawaii Benefit from the Cryptocurrency Boom? Or will over-regulation continue to get in the way? It all depends on what happens in the upcoming legislative session.

Cryptocurrency, sometimes called digital currency, continues to rise in value as it becomes more popular and more investors buy it in the market.

Bitcoin is probably the most well-known cryptocurrency, but there are thousands of others, including Etherium, Dogecoin and Monero. The overall market is valued at $2.2 trillion, and every day there is news about a company, country, state or municipality that is accepting or investing in cryptocurrency.

Unfortunately, Hawaii residents have been largely left out of the crypto currency market thanks to regulations that make it nearly impossible for them to operate here.

Cryptocurrency companies are subject to Hawaii’s remittance law, which requires them to have cash reserves equal to the value of the virtual assets they hold. So a company that has $100 million in Bitcoin and Ethereum must also have an additional $100 million in cash.

It’s easy to see how this could be too much of a financial burden. This is why the two largest cryptocurrency exchanges, Coinbase and Binance, do not operate in Hawaii. Like other well-established companies such as RobinHood Crypto.com or PayPal’s Cryptocurrency Hub.

In 2019, the state launched the Digital Currency Innovation Lab, essentially a regulatory sandbox that allows certain digital currency companies to operate in Hawaii without having to meet cash reserve requirements under the Money Sender Act.

Unfortunately, the sandbox expires at the end of 2022. Without action from the Legislature to reform or deregulate cash reserves, Hawaii’s involvement in the cryptocurrency space could end before it has a chance to grow.

Gaiser helped me demystify the concept of cryptocurrency, calling it “the latest evolution of… a practice as old as time, and that is barter – exchanging one thing for another and using some kind of symbolic token to represent what you are exchanging.”

While the concept of digital currency may seem foreign and complex, Gaiser noted that we are already very familiar with various forms of digital transactions.

“Even now,” she said, “I pay for some things with credit card points. I book certain flights with airline miles. Every time I give and receive a gift card, it’s denominated in dollars, but it’s not really dollars. It’s a little more like store credit. We are all actually quite sophisticated consumers of various types of currencies, not all of which are associated with the US government.”

Gaiser said there is a place for government regulation of cryptocurrency, such as to prevent fraud, but a balance can also be found that doesn’t place an unsustainable burden on cryptocurrency companies.

She said it would be a “tragedy” for Hawaii’s economic future if the Legislature doesn’t act quickly and continues to over-regulate cryptocurrency companies in the state.

“Being in 2022, in the world of Bitcoin and cryptocurrency, is like being in 1996, in the world of the Internet,” she said. “There’s so much we haven’t done yet, we haven’t built yet. I would hate to see Hawaii miss out on innovation to really improve lives and be creative, be innovative, create new products, [and] then also miss out on the wealth that comes with that.”

Since the government’s cryptocurrency sandbox went into effect in March 2019, 61,000 Hawaii customers have been able to participate in the cryptocurrency market. In this limited time, they completed $611 million worth of cryptocurrency transactions . Imagine what it could mean for our economy if Hawaii residents were able to fully participate in the global digital currency market.

I hope our public policymakers can see this potential and remove the barriers to cryptocurrency that are holding us back.