Hawaii Exempts Crypto Firms From Money Transmitter License

On June 28, Hawaii made a significant decision by dropping its money transmitter (MT) license requirement for cryptocurrency firms. While these firms will no longer need a Hawaii-issued MT license to conduct business within the state, they must still comply with federal regulations. Let’s delve into the details.

Effective July 1, digital currency activities are no longer regulated under Chapter 489D of the Hawaii Revised Statutes (HRS) — the 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.

This regulatory change follows the conclusion of Hawaii’s Digital Currency Innovation Lab (DCIL), a two-year pilot program created through a partnership between the HTDC and the DFI. The DCIL allowed digital currency issuers to operate without a state-issued MT license in a controlled environment.

Compliance with Federal Regulations

Despite the lifting of the state-specific MT license requirement, Hawaiian crypto firms must still adhere to federal regulations. These include 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.

Streamlining Regulatory Barriers

State money transmitter licensing laws have posed significant challenges in the US. 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, consumers are advised to remain vigilant against potential bad actors. Recently, the FBI and local police have warned about an increasing number of impersonation scams in Hawaii, where scammers pose as law enforcement to steal cryptocurrency.