Hawaii Exempts Crypto Firms From Money Transmitter License
On June 28, Hawaii decided to drop its money transmitter (MT) license requirement for cryptocurrency firms, although these firms will still need to comply with federal regulations.
Hawaiian Crypto Firms MT Exemptions Stems from Sandbox Completion
Effective July 1, digital currency activities are no longer regulated under Chapter 489D of the Hawaii Revised Statutes (HRS) — Money Transmitters Modernization Act — or any other statutes governed by the Hawaii Division of Financial Institutions (DFI).
The Department of Commerce and Consumer Affairs (DCCA) and the Hawaii Technology Development Corporation (HTDC) jointly announced this landmark decision.
🇺🇸U.S. state of Hawaii’s regulatory sandbox concludes today.
Crypto companies will no longer require a Hawaii-issued money transmitter license to conduct business within the state.
However, they must comply with federal regulations. pic.twitter.com/yu7h8wRgLS
— Ajay Kashyap (@EverythingAjay) July 1, 2024
This regulatory change follows the conclusion of Hawaii’s regulatory sandbox initiative, the Digital Currency Innovation Lab (DCIL), which ended on June 30.
The DCIL was a two-year pilot program created through a partnership between the HTDC and the DFI, allowing digital currency issuers to operate without a state-issued MT license in a controlled environment.
However, despite the lifting of the state-specific MT license requirement, Hawaiian crypto firms must still comply with federal regulations.
The HTDC emphasized that DCIL participants and other companies wishing to conduct digital currency activities in Hawaii must adhere to federal licensing and registration requirements set by agencies such as the Financial Crimes Enforcement Network (FinCEN), the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA).
Additionally, Hawaiian crypto firms must follow relevant federal regulatory measures concerning consumer protection and anti-money laundering (AML) protocols.
Hawaiian Crypto Firms Exemption Will Bypass Regulatory Inconsistencies
State money transmitter licensing laws have posed significant challenges in the US. For example, in April 2024, the FBI warned Americans against using unregistered crypto money transmitters.
Obtaining a Hawaii MT license or another state MT license requires substantial investment, including a comprehensive business plan and a robust compliance program.
The exemption from the MT license is seen as a critical step in reducing regulatory barriers and inconsistencies, making it easier for Hawaiian crypto firms to innovate and grow in the state’s digital currency market.
However, the DCIL advises consumers to remain vigilant against potential bad actors.
Recently, the FBI and local police have warned about an increasing number of impersonation scams in Hawaii, in which scammers pose as law enforcement to steal cryptocurrency.
Thieves have been known to call users, falsely claiming they have an outstanding arrest warrant.
Additionally, the FBI highlighted how con artists use social media to pose as attorneys from fictitious law firms, contacting victims with promises to recover lost funds.
Between February 2023 and February 2024, crypto scam victims reported $9.9 million in losses to the FBI’s Internet Crime Complaint Center (IC3).
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