The following testimony was submitted by the Grassroot Institute of Hawaii on March 30, 2021, for consideration by the Hawaii House Committee on Finance.
To: House Committee on Finance
Rep. Sylvia Luke, Chair
Rep. Ty J.K. Cullen, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive Vice President
RE: HCR118 & HR94 — REQUESTING THE DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS, FOLLOWING THE COMPLETION OF THE DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS’ DIVISION OF FINANCIAL INSTITUTIONS’ AND HAWAII TECHNOLOGY DEVELOPMENT CORPORATION’S STUDY, TO RECONSIDER ITS 2016 RULING ON ASSET RESERVE REQUIREMENTS FOR DIGITAL CURRENCY COMPANIES, VIRTUAL CURRENCY COMPANIES, AND CRYPTOCURRENCY COMPANIES TO CONDUCT BUSINESS IN HAWAII AND TO ALIGN THE STATE’S ASSET RESERVE REQUIREMENTS FOR THESE COMPANIES WITH THE ASSET RESERVE REQUIREMENTS IN OTHER STATES
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer its comments on HCR118 and HR94, which would request the state Department of Commerce and Consumer Affairs to reconsider its rule on reserve requirements for digital currency, virtual currency and cryptocurrency companies, instructing the department to align Hawaii’s rules on asset reserve requirements with those of other states.
Between July 2010 and today, March 29, 2021, the value of Bitcoin — the most well-known digital currency — has surged from 9 cents per coin to just under $58,000 per coin.1
That’s approximately a 64,444,444% increase in about a decade and more growth than the S&P 500, Dow Jones, or NASDAQ have ever experienced.
However, most Hawaii residents have been shut out from full participation in this growing new market thanks to a burdensome ruling by the state Department of Commerce and Consumer Affairs that digital currency businesses must have cash on hand equal to the total amount of all cryptocurrencies held by Hawaii residents using their services.2
This rule forced the biggest digital currency exchanges to stop serving Hawaii. A then-vice president of Coinbase said that Hawaii’s rule was not only unnecessary to protect consumers, but also “untenable” for any business.
In a state that is looking to encourage innovation, investment and a more diverse economy, this rule is counterproductive. Rather than burdening this sector of the economy with more regulation, the state should be looking for ways to increase economic freedom. We should immediately reconsider this rule and other barriers to our state’s economic growth.
The value of the new digital currencies may go up or down in the future, but the real loss for Hawaii residents is their inability to participate in this new form of business in the digital age.
Thank you for the opportunity to submit our comments.
Executive Vice President
Grassroot Institute of Hawaii