As an experienced financial analyst, I strongly believe that while it is crucial for crypto firms to adhere to applicable federal regulations, additional state-enforced licensing requirements may lead to over-regulation. The Hawaiian regulators’ findings highlight this issue and explain why many crypto companies prefer operating outside the US.
In Hawaii, crypto companies are now freed from the necessity of obtaining a Money Transmitter License (MTL) to conduct business within the state. However, they remain subject to adhering to all applicable federal regulations regarding licensing.
As a cryptocurrency industry analyst, I’d like to share some exciting news for businesses operating in Hawaii. Previously, it was mandatory for these firms to obtain a Money Transmitter License (MTL) from the Hawai’i Department of Commerce and Consumer Affairs (DCCA) in order to legally run their business in the state. However, recent updates bring good tidings! The DCCA has announced that this requirement will no longer be enforced starting June 30. This change is expected to facilitate smoother operations for businesses within the cryptocurrency sector in Hawaii.
Still Subject to Federal Licensing Laws
As a researcher involved in the Digital Currency Innovation Lab (DCIL) project, I’m thrilled to share that we recently reached a significant milestone. The Hawaii Department of Commerce and Consumer Affairs (DCCA) announced on June 28 the successful completion of this collaborative initiative. Launched in 2020 together with the Hawai’i Technology Developmental Corporation (HTDC), our goal was to delve into the digital currency landscape within the state and evaluate the regulatory requirements for businesses focusing on cryptocurrencies.
In simpler terms, the initial trial enabled digital currency businesses to operate within the state’s borders without first acquiring a state-issued money transmitter license for their transactions.
Based on the press release, the project’s results imply that digital currency firms are exempted from obtaining a Hawaii money transmitter license to operate in the state. Consequently, they can carry out transactions without regulatory oversight under the Multi-State Money Transmitter (MTL) exemption.
Crypto businesses are exempt from complying with certain state-level regulations, specifically those under Hawaii’s Money Transmitter Law. However, they remain bound by any federal licensing and registration obligations mandated by entities such as FinCEN, SEC, and FINRA.
The DCCA advised consumers to stay alert and take initiative when interacting with cryptocurrency businesses and unsupervised trading platforms.
Banking Commissioner Iris Ikeda commented on the project and its findings.
From hereon, I’ll shift the focus of analysis towards the expansive realm of digital currencies. Regardless, my commitment remains unwavering: keeping consumers educated about the potential risks involved in dealing with such currencies. I strongly advise everyone to stay informed before engaging in any transactions related to digital currency.
Eleven diverse companies took part in the sandbox trial: among them were exchanges, brokerages, payment solutions providers, and ATM network operators. The following is a list of the participating companies: Apex Crypto, bitFlyer, BlockFi, Cloud Nalu, Coinme, ErisX, Flexa, Gemini, River Financial, SoFi, and Uphold.
Throughout the duration of the program, BlockFi, a cryptocurrency lending company, sought bankruptcy protection under Chapter 11.
Opinion
The rulings issued by Hawaiian regulators could indicate that the cryptocurrency sector is facing excessive regulation. Although it’s essential for businesses to adhere to federal guidelines, additional state-level regulations might be unnecessary and burdensome. Regulation imposes significant costs not only in terms of enforcement but also due to companies opting out of operating in states with stringent regulatory frameworks.
Why should businesses and individuals be required to go through additional bureaucracy and expenses for state-required licensing if they are already adhering to federal regulations? The example of Hawaii’s pilot project illustrates the excessive regulatory burden in the US, leading many crypto companies to set up shop outside of the country instead.
US regulatory bodies need to carefully consider if the extensive bureaucratic requirements are truly beneficial.
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2024-07-01 19:13