Imagine using a payment system where anyone could become their own bank, a system where no one oversees all the money. This is what makes cryptocurrencies so important. Cryptocurrencies (aka “crypto”) are digital currencies that can be traded on a large peer-to-peer network using blockchain technology. Blockchain is a type of database technology that was created so that digital documents could not be forged. Currently, in 2021 a popular use case for blockchain is being a ledger for cryptocurrencies to keep track of all their transactions. The benefits of this new economic technology are its secure transactions, lack of need for a mediator, and the decentralization of the currency. The reason why cryptocurrencies are so important is because of the financial freedom that they create. Cryptocurrency transactions are secure because each transaction is encrypted by cryptography and then validated by groups of computers called miners. A cryptocurrency miner uses a computer’s resources to verify cryptocurrency transactions. Each time a miner verifies a transaction to the blockchain, they are rewarded with that specific coin or token for their work. For decentralized cryptocurrencies, there is no middleman in control of your money as there is in a centralized bank. This makes the technology very enticing since anyone regardless of their social class can invest in cryptocurrencies.
So why are cryptocurrencies restricted in the State of Hawai’i? In 2016, Bitcoin hit an all-time high of being valued at $20,000 per coin. Regulators started to quickly pay attention to this commodity because of the financial interest. Soon after the events of the peak, the State of Hawai’i took action and made it very difficult to buy cryptocurrency from exchanges with the double-reserve requirement. The double-reserve requirement is regulated under Hawaii’s money transmitter laws and makes it so that cryptocurrency exchanges must hold an equal sum of USD to the crypto holdings of their clients. As Branco puts it “Let’s say that you and I invest fifty million dollars in crypto. The trading house has to have fifty million dollars in reserve, just to compete in the Hawai’i market.” Thus, Branco recognizes that the requirements the State of Hawai’i has put on cryptocurrencies are so high that cryptocurrency exchanges do not want to open their doors to the island nation.
People have many terms for Cryptocurrency brokers or trading houses, but in this paper they will be referred to as exchanges. In 2020, the State of Hawai’i made the Digital Currency Innovation Lab Program. This is a sandbox program for crypto exchanges to bypass the money transmitter laws that they currently had in place. The progress that Hawai’i is achieving with cryptocurrencies is great; however, only exchanges who applied to the program are allowed. This leaves out many exchanges that serve exclusive cryptocurrencies with different use cases. This paper serves as a message and guide to show why Hawaiian residents should have the financial freedom to invest in whatever they please and not be restricted in their digital investments. Most people think that cryptocurrencies are about assets and capital, but I propose that the new development of financial technology can be solved with blockchain. Blockchain can help provide financial freedom to Hawaiian residents, resolve tourism competition, provide solutions to Hawaiian trade, and help progress renewable energy. This article is meant for Hawai’i State lawmakers and residents, to inform and educate them about the opportunities of cryptocurrency and blockchain.
Two individuals interviewed for this paper were Patrick Branco and Jeffrey P. Schmidt. Patrick Branco is the State House Representative for the District of Kailua and Kaneohe Bay. He has shown his support for crypto and has put forth a resolution for the DCCA of Hawai’i (Department of Commerce and Consumer Affairs) to lower the reserve requirement for cryptocurrency exchanges. He was chosen for this paper because of his experience as State House Representative for Hawai’i and being a crypto investor. He has experienced the limitations that the State of Hawai’i has put on themselves with the crypto reserve requirements. Branco and many others are very important to the freedom of crypto for the residents of Hawai’i.
Jeffrey P. Schmidt is the CEO of Abbaris Global. Abbaris Global provides legal and regulatory consulting for blockchain and cryptocurrency. Schmidt has profound knowledge of cryptocurrencies and blockchain, and he was an attorney for Ethereum in 2016. Ethereum is a very well-known cryptocurrency in the market. Jeffrey P. Schmidt has helped people like Vitalik Buterin, the creator of Ethereum, with legal and regulatory aspects of cryptocurrency and blockchain. The views and information that the interviewees provide about blockchain and cryptocurrencies are both necessary to educate Hawaiians about the technology.
The Digital Currency Innovation Lab is a pilot program produced by and for the State of Hawai’i. The sandbox is meant to open its doors to cryptocurrencies again. The Technology Development Corporation (HTDC) and the Hawai’i Division of Financial Institutions (DFI) are partnering together to make the pilot program work. Nonetheless, does this pilot program help the scope of what cryptocurrencies are trying to achieve? Branco states, “So for Hawai’i in general, we’re always kinda behind. We’re not early adopters of technology and things that would boost our economy. In terms of crypto, I think it’s crazy that we’re not able to invest like other states.” Hawai’i has always been slow to change. It is quite known that tasks do not usually get done quickly and efficiently on the islands; everyone is on “Hawaiian time”. The issue with crypto is that it is changing so fast due to many new tools and technologies being developed. Blockchain and decentralized applications like the Helium project, where people can be rewarded in crypto for supporting one of the largest decentralized wireless infrastructures in the world, are being developed. Crypto projects that support incentives are quite attractive to individuals because of the new ways they introduce passive income. Despite the fact that the state of Hawai’i only allows so many Crypto exchanges, defeats the purposes of what Crypto is trying to achieve. DeFi or Decentralized Finance should be the goal of Hawaii’s pilot program. Decentralized Finance is a term that describes personal finances relying on blockchain-based technologies, rather than central institutions that rely on financial intermediaries. This doesn’t mean eradicating banks and centralized institutions, it means that there is value in technologies that cannot be centrally controlled.
Cryptocurrency is an opportunity, and limited openings for exchanges to sell cryptocurrencies does not help the situation. Decentralized Finance is the new path of financial technologies. As Schmidt put it “Just as the internet was when it was invented, or steam engines that changed the way we do everything, blockchain is so different from the way we do things currently and allows us to accomplish those things so much better, more efficiently, and more securely. That, I believe, is going to have a significant impact on how we do business in the future.”
Blockchain and cryptocurrencies have the potential to change everything from personal finance to centralized technologies in our day-to-day lives. Hawai’i with their Crypto regulations is like living in a place with regulations on horses and buggies in a jet plane society. Hawai’i is capable of getting ahead in Crypto; Hawai’i has been technologically advanced compared to the rest of the U.S. When the internet had just been born, Hawai’i was a prominent leader in the 70s by creating the ALOHAnet. The ALOHANet is the grandfather of computer networking and paved the way for how WI-FI works today. If Hawai’i was able to do this, why can’t the small island nation do the same with blockchain and cryptocurrencies?
Blockchain can help provide financial freedom to Hawaiian residents. Hawai’i is a beautiful place with unique business culture. Although it is beautiful, the cost of living is very high. To survive financially in Hawai’i, it requires that you must at least be making double the federal minimum wage. Anyone could put a percentage of their income into assets so they can make their money work for them. Since the U.S. stock trade starts at three in the morning in Hawai’i, there is a disadvantage for local residents. By eight AM in Hawai’i, the stock market trading day is almost over. Thus, cryptocurrencies have the advantage of being tradable assets at any time, as long there is a demand. To live in Hawai’i, you have to pay for expensive groceries, high electricity costs, pricey gas, and costly rent or property taxes. To counteract this, Hawaiians should be able to invest in Cryptocurrencies. Investing in crypto could be a financial advantage; however, the State of Hawai’i limited openings for exchanges to sell cryptocurrencies destroys that reality.
The State of Hawai’i restricting crypto exchanges to protect their residents with money transmitter laws hinders their ability to compete in the market. Crypto will not stop because the whole internet would need to shut down. The lack of understanding of blockchain and cryptocurrencies leaves Hawaiian residents vulnerable to shady traders that have the chance to scam them. Since the state’s restrictions make investments difficult, it is an alarming reality for people who want to buy crypto. For example, in a Hawai’i News Now report by Rick Daysog, a Hawaiian resident forfeited half of her retirement and stated that she “lost more than $60,000 in a Bitcoin investment scheme” (Daysog 1). Restricting trusted exchanges opens the way for scammers to trick local residents and make unwise decisions because of the learning curve of Cryptocurrencies. It would make more sense to have exchanges not associated with money transmitter laws so that local Hawaiians don’t get scammed. For Hawai’i, to make a safer market for crypto, it needs to be an easier and more accessible environment for people looking to invest. Also, what new types of tourism and trade could open up from opportunities like this?
Blockchain can help resolve tourism competition. One of the biggest industries for Hawaii’s economy is tourism. The State of Hawaii Data Book holds information on the economics of the State of Hawai’i. In this data book, table 13.01 displays the direct income for major export industries from 1990 to 2019. It shows the value of production for pineapple and sugar as well as expenditures from military defense to tourism. Furthermore, in table 13.01, tourism expenditures are labeled to be the highest at $17,844,300 in 2019. Tourism is a major industry, competing with Hawaii’s military budget. Besides how crypto could help Hawaiian residents financially, blockchain and cryptocurrencies can impact tourism-based businesses completely. Many international tourists come to the islands, but do not have the proper currency. International tourism accounted for 25.79% of Hawaii’s tourists in July of 2019 according to the Department of Business, Economic Development & Tourism Visitor Statistics. Comparatively, Hawai’i during February of 2021 still had international tourism compose 29.36% of tourists entering the Islands despite the lingering COVID-19 pandemic. Furthermore, Hawaii’s international tourism with the added statewide crypto acceptance could make it much easier for international travelers to pay using cryptocurrency. As Branco iterates “I think it’s another way to invest. I think it’s another way to conduct yourself globally….a currency to match globalism”. Having a currency to match globalism can be a huge advantage within a state that has millions of tourists coming every year. All different types of international tourists come to Hawai’i each year, all with different money depending on their country of origin. Rather than pay the price to exchange their money, it would be an easier process for international travelers to hold crypto instead. The stress and additional taxes that come from money exchanges can serve as a disadvantage to businesses in Hawai’i. In this crypto boom, there is a whole new world of millionaires that made millions of dollars from cryptocurrency. Crypto could help boost the Hawaiian economy immensely with this new wave of crypto millionaires.
Slowly, companies like Tesla have started accepting payments of different cryptocurrencies. Companies in Hawai’i could become a huge market for crypto fanatics. Online tourism brokers like Groupon could pave the way for a large-scale crypto economy. Tourists would be attracted to this crypto hotspot and would bring their gains with them. This would boost Hawai’i-based businesses dramatically. Cryptocurrencies could be a revenue stream for local companies in Hawai’i; However, with the restrictions currently in place, that doesn’t seem possible. If businesses are worried about the volatility of cryptocurrencies, then they can trade their volatile cryptos into stable coins. Stable coins are a type of cryptocurrency with an unfluctuating price. Even though they are technically centralized, it is a better option because crypto exchanges make it easy to trade between stable and unstable coins. As a result, Hawai’i doesn’t just have to be a melting pot of culture; it can also be a melting pot of international business through crypto. Other types of businesses like crypto gambling and crypto creation could revolutionize Hawaii’s tourism economy. Blockchain can help provide solutions to Hawaiian trade. With the development of powerful tools that blockchain has created, businesses that have adapted to it have been revolutionized. There are a variety of more ways to utilize blockchain other than just applying it to cryptocurrencies. For example, Hawaiian agriculture could flourish and be more effective by implementing blockchain technology to supply chain management. Walmart did this, and as Schmidt puts it “One of the heads at Walmart told his folks ‘Look at this, I have a bag of mangos here, where did they come from? Why don’t you guys tell me, where you got these mangos from. What kind of farm is it? Is it a good farm? Do they use pesticides or not? Whatever.’ It took them six days to track it back to the farm. Then they did an experiment using blockchain to track it back and it took them six seconds, to track it back. So they knew exactly the farm, where it came from. So this is a very beneficial force to keep track of the supply chain. But it is also very important. When you have, for instance, spoiled romaine lettuce that’s causing listeria or what have you. So they could go back to where the farm came from, instead of shutting down all romaine lettuce. Track it back to the farms, shut down that farm down, and so that becomes very helpful.” Adding blockchain to supply chain management in businesses can increase efficiency in a variety of fashions. So just as Walmart changed their supply chain, why can’t local businesses do the same? For example, poke is a big delicacy in Hawai’i, and it is delivered and bought by local Hawaiian residents all the time. Let’s say some poke spoils in a shipment going to a local store. Bacteria could spread from this, and the result could cause a lot of food poisoning. The effects of this could destroy the status of a business financially as well as destroy its reputation. Whereas, with blockchain controlling the supply chain, it could very easily trace back to where the poke was first contaminated.
With the recent COVID-19 pandemic there were a lot of supply issues that could have been solved using blockchain. Jill E. Hobbs is one of the professors in the Department of Agricultural and Resource Economics at the University of Saskatchewan and has produced great research in many fields like supply chain economics. In her article The Covid-19 Pandemic and Meat Supply Chains, she states that “Digitalization within food supply chains is an ongoing trend that may also accelerate as a result of the pandemic. Technologies that facilitate contactless electronic transactions over paper-based transactions become more attractive to facilitate physical distancing, and as remote working and reduced business travel become the ‘new normal’… The development of common data standards, for example, for sharing customs data or traceability data, can facilitate transactions in cross-border supply chains” (Hobbs 4). The COVID-19 pandemic has greatly changed the way that intermediaries are involved in business transactions. As Hobbs emphasizes in her paper, contactless electronic transactions are becoming more of the new norm. Blockchain can be a lot more effective than traditional human intermediaries because of the improved traceability, immutability, reliability, and fast transactions that the technology offers. Additionally, how can this disintermediation be effective in the real world? As Schmidt points out, “….blockchain is so efficient because it eliminates the middleman….if you want to send money to the Philippines you have to go to the bank, the bank has to check if you have the money. The bank then connects with a couple other middlemen to finally the Philippine bank you are sending it to….. Now, this is the system that we have. Even when you pay out a credit card, it’s CVS. A credit card has to be connected to a bank, you know to check it all out, and send some out. So you have these middlemen, and with the blockchain you eliminate the middlemen. They are primarily there to create trust in the system to verify that everything is correct. So blockchain, at times, has been called a trustless system. It can be a bit of a confusing term, but the fact is that you can’t trust it, without anyone else checking it. You don’t have to have all these middlemen, and that’s why it’s so efficient.” Disintermediation has been the way tech has been progressively developing systems and not needing middlemen. Blockchain can now be an asset to businesses that conduct trade more efficiently without the previously needed role of the intermediary. Many businesses could be revolutionized depending on how they develop and deploy their own blockchains or use pre-existing ones. This could change many businesses in the way they treat their trade. On the other hand, transparency is both a positive and negative aspect of blockchain. While blockchain and cryptocurrencies have been praised for their openness, businesses that handle very sensitive information could be a target if they use public blockchains. People who would like to steal unauthorized access to data like black hat hackers would see value in obtaining sensitive information. An easy solution would be just to make a private blockchain, but doing so changes a lot of key factors that some types of businesses can’t afford to do. Some of the key features that are changed from a public to a private blockchain are the following: private blockchains are centralized which means that there can be multiple points of failure when it comes to data security depending on the pre-approved vendors. Secondly, mining can become an issue because the integrity of the blockchain can be influenced by whoever controls the nodes. Centralized mining can create trust issues with the integrity of the blockchain. Data privacy in blockchain has been a big issue for regulators because privacy is essential to consumers. These are issues that need to be addressed so that blockchain can become more adapted to businesses. A paper called Blockchain in Post-Trade: Blocked by Regulations and Legal Challenges by Haitham Al Salmi explores the trade potential and regulatory problems of blockchain. Salmi describes the problems that occur when a blockchain is centralized. “In centralized systems, owners of data are the ledger owners…. In a distributed ledger, it is unclear who will be responsible for protecting the ledger and whether it will remain as a sole responsibility of the CSD or the group of blockchain network validators” (Salmi 25). As a result of private blockchains being centralized, it is difficult to determine who is at fault in blockchain regulations. For that reason, data privacy becomes a major issue. Since consumers value their data, blockchain needs a secure solution to protect it. The current solution so far is a cryptographic concept called zero-knowledge proofs (ZKP). One example of this is Zcash, a cryptocurrency that operates with ZKP to enhance privacy for its users. ZKP entails that someone can prove that they know a secret, but give no information as to how they know that secret or what exactly the secret is. ZKP tries to create a consensus of both parties in an otherwise trustless system.
Zero-knowledge proofs are very powerful in the sense that someone can verify their identity without giving any information about themselves. This concept can change the way data is handled in the near future, and how blockchains can adapt to revolutionize data privacy. Zero-knowledge proofs are quite useful in the cryptocurrency world since the cryptographic concept can help protect users’ privacy. The same concept can be applied to private blockchains that protect sensitive information. In spite of this Haitham Al Salmi affirming in his piece that “As chain transactions will be available to all, data privacy can be compromised. Regulators consider such data as national data and, therefore, allow the application of data protection legislation. Regulators are very sensitive to the confidentiality of such data in view of investor protection and market manipulation. Moreover, there are territorial restrictions on where data is stored. Many jurisdictions enforce storing such data in-country, considering it as national state data” (Salmi 25). Regulators must be careful of the new laws introduced by governments, as this could make or break blockchains. In the past, large tech companies have been atrocious at keeping their data safe resulting in massive leaks of personal information being taken from them all time. If blockchain technology isn’t regulated properly, it could lead to making blockchain ineffective for companies. For blockchains to adapt zero-knowledge proofs is a great step in the right direction. It can ensure data privacy and the security of people’s information in businesses and corporations. How Hawai’i regulates blockchain is critical to the technological advancement of jobs and businesses in the island nation. Blockchain could create a lot of new jobs in the technical center that Hawai’i needs. Meanwhile, Hawai’i is stuck with slow regulations that are not getting anything done. So, how should Hawai’i regulate blockchain and cryptos? What could that mean for the future of Hawai’i?
Blockchain can help progress renewable energy. Admittedly, cryptocurrencies have cons to their use, like their impact on the environment. The environmental concern of cryptocurrencies is because of mining. Although it varies widely on how transactions are verified depending on the crypto, using a computer’s resources to verify cryptocurrency transactions can be quite profitable with the right hardware; however, it is quite taxing on electrical power consumption. In Hawai’i, it is difficult to match the profit of mining crypto to the high costs of electricity. Though theoretically speaking, that should not be the case because of the immense opportunity that Hawai’i has with renewable energy. For example, Iceland has renewable geothermal energy that has resulted in cheaper energy. Some Icelandic residents have taken full advantage of their opportunities and have created businesses around cryptocurrency mining. Their residents use different types of mining hardware to gain the profits of mining cryptocurrency. These businesses have massive racks of mining machines called ASIC’s (Application Specific Integrated Circuit); they are specific machines dedicated to mining certain coins. Setting up a business like that currently in Hawai’i would be quite expensive and non-profitable. The state’s electricity rates are quite high compared to others. In a report by the Hawaii State Energy Office, they stated that in the past decade “Hawaii’s electricity prices are more than double the U.S. average” (DBEDT 2), and “Hawaii depends more on petroleum for its energy needs than any other state. Less than 1% of electricity in the United States is generated using oil. By contrast, Hawaii relied on oil for 67.3% and on coal for 15.1% of its electricity generation in 2015” (DBEDT 2). Hawai’i has an energy problem, and while the Hawaiian government has pushed for 100% by the end of 2045, the state still has a lot of work ahead of them. Although the technology for solar power has been evolving, from a business standpoint it doesn’t make sense for Hawai’i to switch to solar. For solar to be profitable for businesses, the price of oil has to be high. Moreover, with the COVID-19 pandemic, oil prices have been extremely cheap. Cryptocurrencies are a great innovation of finance technology, but it has always been Hawaii’s motive to keep our environment clean. There are ways to counteract the model of energy hunger that cryptocurrency mining has created. For example, just like Iceland has used free energy to power crypto, Hawai’i could do the same thing.
Over the past decade, different types of renewable energy have been used to power Hawai’i. A new way of crypto being eco-friendly could be from renewable energy. Unlike other states that have seasons that could interfere with operations, Hawai’i holds a steady climate all year long. Renewable crypto-mining could be a whole new type of financial feat to promote green energy for Hawai’i. Many people who mine crypto are now setting up shop in different countries like Iceland that have cheap energy so they can mine cryptocurrency. Hawai’i has a real opportunity, more so than other states, but the high energy rates make it a demanding environment. Mining cryptocurrency with renewable energy like solar or wind could be a self-sufficient economic money maker. Other renewable energy sources like ocean power could also have big potential for research for Hawai’i regarding renewable energy.
Another way to fix the cryptocurrency energy crisis could also be (PoS) or proof of stake. PoS is a different type of model for verifying crypto transactions. To explain the difference between PoS and PoW, an analogy will be used. There are two classrooms, one is PoS and the other is PoW. The PoW room has a teacher write down a math problem on the board and says that whoever solves the problem first gets the extra credit. So every single student works as fast they can to solve the problem. Once one of the students gets the problem right, then the teacher goes to the next problem and keeps going. In the PoS room, a teacher writes down a problem on the whiteboard and asks their students if they would like to stake their extra points and get more points for each problem they solve. If one of the students does not solve the question or falls asleep, they lose the opportunity to get extra credit and what they staked. So instead of having every single student solve the problem, she picks on a single student. Once that student solves the problem they repeat the process, instead of having everyone chaotically try to solve the same problem. Now, PoS and PoW are both types of cryptocurrency mining, but they solve the issue of validating transactions differently. PoS is effective because it greatly reduces the number of miners used for validating transactions and is a lot more efficient. Evaluation of Energy Consumption in BlockChains with Proof of Work and Proof of Stake is a piece by Rong Zhang and Wai Kin that tests the performance of blockchain. Zhnag and Kin observe that “We created an agent-based model of a block-chain system equipped with PoW, PoS…. We carried out simulation experiments under six consensus modes. Results from simulation experiments show that energy consumption can be reduced by more than 75% by the pure PoS mechanism. The lowest energy consumption situation is achieved by the mixed consensus mechanism” (Zhnag and Kin 5-6). Instead of having a power-hungry model like PoW, PoS can act as an alternative to the previous environmentally hazardous model. Hawai’i could become a crypto mining powerhouse like Iceland with the right renewable energy resources. Another benefit to PoS is the interest while staking and only a certain number of people are allowed to join because of the penalties for not contributing to the network. For example, let’s say you are using a cryptocurrency that uses PoS. If your machine is down and is not available to verify the next transaction, then you are hit with a penalty and might be removed from that specific crypto stake. This is to make sure that the network nodes can verify as many transactions as possible and not slow down the network. PoS is an interesting solution because a lot of mining pools are trying to get in on a slice of the pie because of the limited quantity of slots. Investors of crypto can put some of their crypto in that certain stake, lock it up, and gain interest on it through mining organizations who’ve been accepted in the network. The model seems great because it emphasizes that the blockchain must be kept up while incentivizing users in rewards. Mining won’t go away, and not all cryptocurrencies use proof of stake, but these solutions will help provide better avenues for cryptocurrency to advance in Hawai’i. You can think of crypto however you want, an asset, commodity, or even just a currency. In Hawai’i, it has been interpreted and regulated as a currency. This is why crypto has been entangled in Hawaii’s money transmitter laws. Only recently in 2020, have Hawaiian residents had a chance to buy crypto from trusted exchanges again. There were a lot of issues with how the State of Hawai’i interpreted cryptocurrencies and its laws. In his interview, Schmidt admitted that “the head of the DFI was the one who had made this overly conservative interpretation…. It’s overly conservative because the money lending law is a uniform law that was developed and has been adapted by many states across the nation. They were able to interpret it so that it didn’t require double funding. But we were unable to get the bill through the legislature that approved a modification of the lending law. So we were the only state in the nation that didn’t have any exchanges”. Schmidt had testified to help resolve these restrictive laws, although the solution to these restrictions has been clarified differently. In 2020, the DFI worked with the HTDC and made a sandbox program for cryptocurrencies. Other countries and states have used programs like this to adapt to cryptocurrencies. There has been a lot of criticisms towards this program for many reasons, but the acceptance of cryptocurrency exchanges is a good direction for Hawai’i. Third parties like HTDC are valuable since not all lawmakers are acknowledged about blockchain and cryptocurrencies. Lawmakers gaining insight into how technology functions will create a better outlook for technologies like this in the future. Nevertheless, lawmakers should be careful and dynamic about how blockchain and crypto can expand the island’s technological infrastructure and bolster the use cases that the technologies can offer. Schmidt emphasizes that “the regulation of blockchain and crypto is also quite convoluted because it’s brand-new. The various regulatory authorities, many of them simply don’t know what to do with it. Unfortunately, in the United States the federal government has been very slow to do anything. The problem is that they said they want to move slowly and to figure it out, and so we don’t do something wrong. Which is okay, but because they have been so slow, there is the lack of understanding. There is a confusion of what is okay and what is not. When there is that uncertainty in the regulation, then that really puts a limit on the inventiveness and the use. Because people aren’t sure, yakow is it legal or not.” With the HTDC involved in the guidance of the sandbox program that was created gives hope to the idea that lawmakers can grasp a better understanding of how cryptocurrencies work. Understanding how cryptocurrencies operate leads the way for new perspectives on how blockchain technologies should be regulated. Blockchain technologies are in hot water because of the misunderstanding of how they work. If Hawai’i lawmakers were rapidly making laws that would make blockchain technology too exposed, that could lead to regulatory abuse. Bad actors could use blockchain and cryptocurrencies for their ill gain.
Lawmakers need to be careful about being too conservative towards the laws they create as well. An interesting case where regulators acted too hastily with crypto laws was New York State, and as Schmidt puts it “One of the counter regulations was New York state and their example of entering too quickly before you understand what’s going on. They issued a law for a cryptocurrency license, that if you’re going to be an exchange you had to get this New York state license in order to conduct business. Now the license was too complex and not really properly adapted to how business works, took a long time to get, and therefore for a long time very few people even attempted to get a Bitcoin license from New York state. A handful of the larger companies did, and Gemini for instance actually set up a trust in New York City. The trusts are under the banking, and so they are already under a very extensive regulatory scheme. That allows them to operate, that gives the state confidence that they’re operating properly, and gives other people confidence that they’re operating properly.” Hawai’i can do some incredible things with the right expansive regulations in place to broaden blockchain and crypto. Once Hawai’i has stable laws for the technology to grow, businesses and jobs can open up to the community. It is because of the uncertainty that the expansion of crypto in Hawai’i has halted. Blockchain-based supply chain management could revolutionize the agricultural businesses in Hawai’i, but one fell swoop of regulation could stop that. Usually, Hawai’i waits for federal lawmakers to make changes to laws based on new regulations that the federal government implements. Having experience as a Hawaiian lawmaker, Branco sees the flaws with how Hawai’i has treated its crypto regulation. In a statement, Branco says “they say they have to collect data, and they make sure that our consumers are protected. And I’m just like, well look at the data from other states that are doing it. Or look at the data from the federal government. And so as usual Hawai’i waits for federal policy to start, and Hawai’i adopts. Instead of being a leader and letting federal policy follow our example.” There are several pros and cons to blockchain and cryptocurrencies, but Hawai’i needs to stop blocking blockchain. Blockchain can help provide financial freedom to residents. Hawai’i is an expensive place to live, and cryptocurrencies can offer financial support. Local lawmaker’s restrictions on crypto exchanges make it more dangerous for residents to safely invest.
Tourism competition can be rebuilt with blockchain. The COVID-19 pandemic has drastically impacted the Hawaiian economy and its tourism industry. Cryptocurrency can create a more efficient system for globalist currency, because of the incentives for international tourism. Crypto markets should be explored to revitalize tourism. Blockchain can help provide solutions to Hawaiian trade. Supply chain management with blockchain technology creates more effective solutions than traditional human intermediaries because of the improved traceability, immutability, reliability, and fast transactions that the technology offers. Private blockchains can be reliable to centralized institutions as the model helps provide better solutions to data integrity, as well as having zero-knowledge proofs protecting consumer information. Hawaiian renewable energy can advance the development of crypto and blockchain. The energy dilemma can be innovated with cryptocurrency mining. In addition, PoS provides incentives for more energy-efficient mining that residents can create businesses and job opportunities. What is blocking blockchain? Hawaii’s restrictive laws disincentivize the opportunity to provide for what should be an economic right. Residents should have the accessibility to trade advantageously as other states do. So what’s stopping us?
Works Cited
Branco, Patrick. Personal interview. 15 April 2021.
P. Schmidt, Jeffrey. Personal interview. 14 April 2021.
Daysog, Rick. “She Thought She Was Investing Her Savings. She Was Really Handing It over to a Thief.” https://www.hawaiinewsnow.com, Hawaii News Now, 20 Dec. 2019. Web.
2019 State of Hawaii Data Book, State of Hawaii Department of Business, Economic Development & Tourism Research & Economic Analysis, Sept. 2020. Online Database.
Hawai‘i Visitor Statistics Released for July 2019, ehawaii.gov, 29 Aug. 2019. Online Database
Hawai‘i Visitor Statistics Released for February 2021, ehawaii.gov, 25 Mar. 2021. Online Database
Hobbs, Jill E. “The Covid-19 Pandemic and Meat Supply Chains.” Meat Science, 108459, 11 Feb. 2021. Print.
Salmi, Haitham Al. “Blockchain in Post-Trade: Blocked by Regulations and Legal Challenges.” Journal of Securities Operations & Custody, vol. 12, no. 1, 2019. Print.
Hawaii State Energy Office, n.d., pp. 1–46, Hawaii Energy Facts & Figures. Print.
Zhang, Rong, and Wai Kin Chan. “Evaluation of Energy Consumption in Block-Chains with Proof of Work and Proof of Stake.” Journal of Physics: Conference Series, vol. 1584, 2020.