Less than 3 days left to help us reach 250 donors by May 15. Make a gift of any amount today!
Hawaii Should Get On Board With Cryptocurrency Exchanges
The state effectively bans them because of the high levels of collateral required to facilitate the purchase of investments.
September 9, 2021 · 2 min read
About the Author
Last month, a U.S. Senate bill passed that will enforce tax compliance for cryptocurrency exchanges, but Hawaii remains on the sidelines of this economic booster.
The infrastructure bill included language that would help ensure that cryptocurrency exchanges hold their users accountable so the federal government can collect taxes on sales in the same way that capital gains are collected after a stock is sold.
The market for cryptocurrencies surpassed $2 trillion this year and senators hope to gain $28 billion in tax revenue.
Thanks to a 2016 decision by the Department of Commerce and Consumer Affairs cryptocurrency exchanges became classified as money transmitters in the same way that Western Union is classified.
This means that cryptocurrency exchanges are required to have collateral on both sides of the transaction to ensure that money can be sent quickly.
This works for businesses like Western Union where people need money wherever the money is sent, but it is a burden for cryptocurrency exchanges where users typically purchase and hold the cryptocurrency as an investment.
The high levels of collateral required to facilitate the purchase of investments means that this regulation effectively bans cryptocurrency exchanges in Hawaii.
Last year, the U.S. House of Representatives proposed a bill to allow banks to act as custodians for digital currencies, but the bill has not yet passed.
The state of Hawaii also began a Digital Currency Innovation Lab, so cryptocurrency companies would not need to obtain a state money transmitter license through June 30, 2022, but they will be required to obey other sections of the money transmitter laws. So far, 11 cryptocurrency companies operate in this limited capacity.
At the time of this writing, major exchanges like Binance and eToro do not operate in Hawaii. It is also telling that Coinbase left after the 2016 decision and has not returned.
The Hawaii Department of Business, Economic Development and Tourism estimates that it will take until 2023 for Hawaii’s economy to grow to the size it was in 2019.
Meanwhile, some cryptocurrencies plan to handle 1 million transactions per second.
It is time for the state of Hawaii to take a lesson from the speed of cryptocurrency innovation and give citizens full access to digital assets.
Sign up for our FREE morning newsletter and face each day more informed.
Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Column lengths should be no more than 800 words and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.org. The opinions and information expressed in Community Voices are solely those of the authors and not Civil Beat.
Read this next:
Local reporting when you need it most
Support timely, accurate, independent journalism.
Honolulu Civil Beat is a nonprofit organization, and your donation helps us produce local reporting that serves all of Hawaii.
ContributeAbout the Author