Digital currency in Hawaii gets reprieve from close-call cutoff

HONOLULU (KHON2) — A near-death experience. That’s how crypto-currency holders in Hawaii describe an end-of-month deadline that had put their money in limbo.

A solution appears to be in place to stave off the closure of digital currency accounts in Hawaii. But experts tell Always Investigating that the extension of an oversight program is only a temporary patch and it may not work for everyone.

Cryptocurrency is estimated to be a multibillion-dollar market in Hawaii. Last year 134,000 people in Hawaii did more than $800 million dollars worth of digital transactions just with the 15 companies in a state-run pilot project called the Digital Currency Innovation Lab.

That project was set to end on June 30, and that had crypto-holders in a flurry.

“When they (the crypto companies) close your account, you would not have access to it,” explained tech expert and digital-currency-holder Ryan Ozawa, who also serves as the DCIL’s community engagement specialist. “They’re not going to put it somewhere else and say, ‘Well, you can go pick it up later.’ It’s going to go away. So one of the things that many people were right about now getting into was moving their assets into cold wallets or hard storage that isn’t attached to the internet and isn’t controlled by any third party.”

Then came a potential lifeline today: The state announced they’re extending the DCIL program another 2 years, meaning the member companies can continue to be allowed to transact crypto just that much longer in the absence of formal licensing laws.

“They just gave us all a near-death experience for nothing, because there was a lot of panic in the market when they said these exchanges were going to close,” Ozawa said.

Everybody thought that was the only option because the legislature failed to pass crypto-licensing legislation this year, and it was understood the DCIL was only temporary. With the extension, the permission to keep transacting crypto remains limited in scope.

“It’s really only for money-transmitter activity,” explained Iris Ikeda, the state’s commissioner of financial institutions at the Department of Commerce and Consumer Affairs. “If folks are doing the crypto activity for securities trading or for their retirement account, that is not covered by our project.”

Tech experts said the extension might not help all crypto-holders in Hawaii.

“Even though it’s been extended, there’s a possibility that these companies will decide not to continue to participate,” Ozawa said. “If that happens, they will have to close their accounts withdraw or move their holdings into other places.”

The companies would have to give significant notice and opportunities to move money. But cashing out anything right now could be a real bummer.

“Between last summer and this year, we’ve seen about half of the value of the overall crypto market disappear,” Ozawa said.

State regulators are banking on the participating companies to play ball by staying in the extended program, and hoping for lawmakers to try again next session to license the growing market here.

“We want to make sure that everything is on the up and up, they’re legitimate companies, they know what they’re doing, they’re not going to lead consumers astray,” Ikeda said.