Local residents were given 30 days to transfer or sell their digital currency and close their accounts.
It’s a “regulatory sandbox,” with state regulators working closely with a select group of companies and gathering data to inform decisions about how to regulate the industry moving forward.
Since then, the price has dramatically fallen and risen many times, with a huge rally in late 2020, as mainstream businesses and financial institutions invested in the currency and began accepting it as tender.
Coinbase still doesn’t operate in Hawai‘i, though regulators in the Islands are slowly opening the door for digital currency exchanges to operate here.
As commissioner of financial institutions in the Department of Commerce and Consumer Affairs, Iris Ikeda has considerable authority over the regulation of digital currency exchanges.
Immediately prior to her appointment, she was associate counsel for American Savings Bank, and had previously worked for Finance Factors and Ohana Pacific Bank.
And she even served one term in the state House of Representatives, representing District 47 from 1998 to 2000 after beating Charles Djou by 190 votes.
And before COVID-19, DFI was already meeting with licensees using web conferencing services such as Zoom and Microsoft Teams. Many financial institutions are based on the Mainland, and Ikeda says that by handling meetings and examinations online, she is able to reduce expenses and save them time.
Gox filed for bankruptcy protection after losing $450 million in Bitcoin: It remains uncertain how much was stolen by hackers and how much was lost due to poor accounting.
The decision to regulate digital currency exchanges as money transmitters required their compliance with the cash reserve requirements that eventually pushed Coinbase out of the state.
“Since about 2017, I’ve been ideas at the Legislature to supervise or not supervise digital currency transactions under our money transmission statutes,” says Ikeda.
The bill suggested that “highly innovative technologies such as blockchain require an educated and measured approach so that regulations do not stymie innovation and growth.” The bill crossed over to the Senate and was referred to the Ways and Means Committee, where it died.
House Bill 1481 was carried over to the 2018 session, but it died in Ways and Means again.
Three measures were introduced in 2019, but none received committee hearings.
Higashi says he immediately saw a parallel between the Entrepreneurs Sandbox that HTDC runs in Kaka‘ako and the regulatory sandbox that Ikeda was proposing.
“In software terms, a sandbox is a place where you do your trial experiments.
In exchange for the companies providing data to DFI and complying with the terms of the program, DFI would “allow the admitted digital currency issuers to conduct business in Hawai‘i without first obtaining a state money transmitter license.” Basically, DFI agreed to take “no action” in enforcing the existing statutes, specifically relaxing the “permissible investments” requirement for cohort participants.
Companies that did not send the required reports were removed from the program, she said, but only after multiple warnings and opportunities to comply with the reporting requirements.
The commissioner of financial institutions is appointed by the governor, and a future governor could replace Ikeda or ask her to stop the pilot program.
“I see my role as an innovator, trying to get in front of or at least alongside of the different innovations,” says Ikeda.
The question is how to update our state’s regulatory framework to allow for the adoption and use of blockchain and digital currency.
“Because state legislatures typically meet once a year, just not an effective tool to keep up the pace with something that is evolving on a month to month, weekly or even daily basis.
“We want to set up a basic legal framework that ensures protections for local residents so that the investments and the transactions they make have a sound basis,” he says.
In that small European nation, blockchain is used to secure the country’s health care registry, property registry, business registry, succession registry, digital court system and state gazette.
“People have greater faith in government and better quality of life,” Lee says.
“We understand fiat currency very well,” says Ellen Ng, an economic development specialist with the HTDC, referring to government-issued currencies like the U.S.
She says that participants in the Digital Currency Innovation Lab have told her that they haven’t heard of many other state agencies being willing to partner with them in the way that DFI and HTDC have.
Higashi concurs, noting that despite Hawai‘i’s late start with digital currency, we have the opportunity to become a leader.
The first miner to solve the problem earns the right to add a block to the chain and is paid in Bitcoin for their effort.
Transferring currency: The most widely known application of blockchain is to secure electronic payment systems without a financial institution serving as a trusted third party.
Smart contracts: Legal contracts can be converted to code and embedded within the blockchain, allowing transactions without a middleman.
In March 2021, Twitter CEO Jack Dorsey auctioned off the first tweet, with bids quickly rising to $2.5 million.
Government services: In Estonia, blockchain is used to secure the country’s health care registry, property registry, business registry, succession registry, digital court system and state gazette.
Geckos are iconic in Hawaiʻi, as much as pineapples or ukuleles, and, like them, are not native to the Islands.