In a bid to attract crypto businesses back to the island state, Hawaii has allowed 12 cryptocurrency firms to operate without money transmitter licenses, among them Gemini, ErisX, BitFlyer, and upstart River Financial.
The companies are participating in a two-year pilot program run by Hawaii’s Digital Currency Innovation Lab in partnership with the Hawaii Division of Financial Institutions (DFI).
Per the pilot, announced in March, selected companies that could demonstrate they “have the essential capital, financial and technical expertise to conduct business in the State,” according to a press release.
The pilot will help “guide legislation and determine the future of digital currency activity in Hawaii,” said Hawaii’s Department of Commerce and Consumer Affairs.
“We are extremely excited to be one of the first Bitcoin businesses to legally operate in the great state of Hawaii. This is a huge regulatory milestone,” said River Financial CEO Alex Leishman in a statement.
It’s long been possible for crypto companies to obtain money transmission licenses. But, in 2017, the island state placed high demands on such firms: To operate in Hawaii, crypto companies had to hold an equal amount of fiat currency (i.e. US dollars) to the amount they held in crypto (such as Bitcoin).
The idea was to protect consumers in case of, say, a hack, but it made it prohibitively expensive for crypto companies to operate in the state.
“This policy is obviously untenable. No digital currency business—and frankly, no commercially viable business anywhere—has the capital to supplement every customer bitcoin with redundant dollar collateral,” said Juan Suarez, a lawyer for Coinbase, in a blog post in 2017.
The regulatory sandbox means that crypto companies can now operate without this requirement.
Joel Edgerton, COO of bitFlyer USA said in a statement: “We are happy to partner with the State of Hawaii to bring our world class services here. Now residents in Hawaii have access to a trusted, licensed exchange to support their Bitcoin and cryptocurrency trading.”