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Hawaii has the highest barriers in the country to companies that exchange cryptocurrency, and those restrictions could get worse if lawmakers don’t step up and open the door to this potentially thriving new business area.

Bitcoin, the world’s first “cryptocurrency”, was invented in 2009 by an unknown person or group of people under the name Satoshi Nakamoto and allowed people to store, buy and sell digital currency using special software.

Since then, thousands of other cryptocurrencies have emerged, such as Ethereum, Litecoin and Monero. Many of these cryptocurrency companies have risen significantly in value, with the entire cryptocurrency market valued at $2.2 trillion. That’s slightly more than Google ($1.9 trillion) and slightly less than Microsoft ($2.5 trillion).

In Hawaii, cryptocurrency companies are subject to the Hawaii Remittance Act, which since 2014 requires them to hold monetary assets equal to the amount of their virtual assets. For example, if a company holds $1 billion worth of cryptocurrencies, it will also need an additional $1 billion in cash as reserves.

No other state has such a specific requirement for cryptocurrency companies, so most of these companies have either left Hawaii or avoided it.

The two largest cryptocurrency exchanges, Coinbase and Binance, do not operate in Hawaii. Neither Kucoin, Strike, eToro, Bittrex, Bitstamp, Robinhood Crypto, nor PayPal’s “Cryptocurrency Hub”.

In March 2019, the Governor authorized the creation of a temporary sandbox known as the Digital Currency Innovation Lab, which allowed cryptocurrency companies to operate in the state without having to comply with the dual reserve requirement of the Remittance Act. .

Only 15 cryptocurrency companies were allowed to play in the sandbox, which has so far allowed 61,000 Hawaii customers to access virtual currency with a total transaction value of more than $611 million.

Meanwhile, since the program launched, the value of Bitcoin has increased by 370%, from $10,000 in 2019 to $47,000 by the end of 2021.

Looking ahead, legal authority for the sandbox expires on Dec. 30, 2022, meaning lawmakers who want to avoid a complete shutdown of this market must pass some kind of enabling legislation during the 2022 legislative session.

The easiest way to allow cryptocurrency companies to operate in Hawaii is to exempt them from remittance laws.

Twenty states do not require a money transmitter license for cryptocurrency transactions: Arizona, Arkansas, California, Colorado, Idaho, Illinois, Kansas, Maryland, Massachusetts, Michigan, Montana, New Hampshire, New Jersey, North Dakota, Oklahoma, Pennsylvania, Tennessee. , Texas, Virginia and Wisconsin.

Another quick fix would be to add cryptocurrency as an “eligible investment” to the remittance law, thereby eliminating the dual reserve requirement. For example, Wyoming exempted virtual currency from its dual reserve requirement in 2014 and has since become “the most cryptocurrency-friendly jurisdiction in the United States,” according to MarketWatch.

A more complex route would be to create a new licensing requirement for virtual currency companies, which could also bypass the double reserve requirement. This could potentially create an unnecessary administrative burden, but would nevertheless allow for a more dynamic cryptocurrency market if the rules are not too strict.

The Hawaii Division of Financial Institutions is actually introducing such a bill aimed at reducing barriers to cryptocurrency companies in Hawaii. But lawmakers should be careful not to impose too many requirements that defeat the purpose of the bill.

The goal is to ease Hawaii’s toughest virtual currency restrictions in the country and give island residents greater access to this emerging market. This would be another way to diversify our economy and help local families find new ways to make money and prosper.