Hawaii has long been a thorn in the side of crypto companies. That thorn has finally been removed: on 25 January 2024, the Hawaii Department of Commerce and Consumer Affairs issued a press release summarizing its findings on the proper regulatory framework for cryptocurrency—its conclusion is that it will not apply the state’s money transmitter law to cryptocurrency activities. Hawaii initially worked with cryptocurrency companies to create an alternative licensing framework, but was ultimately unable to conceive of an adequate digital asset license.
A large number of states regulate digital assets via their money transmitter laws. Generally, any entity that receives and/or transmits cryptocurrency may fall under these laws in some states, and are thus required to comply with certain licensing, permissible investment, recordkeeping, and other requirements. Hawaii originally took the position that cryptocurrency companies were required to hold such a license to offer services to Hawaii residents. The state’s interpretation of certain requirements under its money transmitter law, however, made it virtually impossible for companies to operate there.
In 2020, Hawaii launched the Digital Currency Innovation Lab (DCIL) to “assess the regulatory framework required for companies specializing in digital currency . . . .” The press release indicated that the DCIL will officially conclude this June and that its findings indicate that “digital currency companies will no longer require a Hawaii-issued money transmitter license to conduct business within the state. The companies will be able to continue transaction activity as an unregulated business.” The release makes clear, however, that cryptocurrency companies will still have to comply with applicable federal laws. The companies are also still subject to state laws of general applicability, such as consumer protection laws.