Hawaii is a relatively conservative state and has been for many decades. Not known for being progressive, the state laws are restrictive when it comes to bitcoin and blockchain technology. Even as bitcoin becomes more and more part of mainstream, buying and selling bitcoin in Hawaii is still not as easy as other states.
A snapshot of Hawaii Cryptocurrency Market:
- It is legal for residents of Hawaii to trade in cryptocurrencies
- It is not legal for exchanges to operate in Hawaii without a license or exemption.
- 15 bitcoin exchanges have been provided exemption to buy and sell bitcoin
- The minimum age to trade bitcoin is 18 years old.
In this article, we discuss how to buy and sell bitcoin in Hawaii, the legality, the best platforms to buy bitcoin from and how to store your coins on wallets.
If you are wanting to get started with buying bitcoin in Hawaii, we recommended the below exchanges:
Top 5 Hawaii Bitcoin Exchanges
Overview of Hawaii Bitcoin Exchanges
Unfortunately, Hawaii is not the most progressive of states and often lags behinds when it comes to innovation and technology. The lawmakers of Hawaii, have therefore presented an appearance of being supportive of bitcoin exchanges, initially installing a licensing framework that “promoted” buying and selling bitcoin. However, this could not be further from the truth, with many bitcoin exchanges pulling out due to the excessive fees, onerous and often illogical compliance requirements, and even imposing requirements that would not even allow for a bitcoin transaction to take place.
In a somewhat outside of the law partnership, a consortium of bitcoin exchanges banded together in August 2020, and initiated a program called the Digital Currency Innovation Lab (DCIL). The Hawaii Division of Financial Institutions was supportive of this initiative and provided an exemption to DCIL cryptocurrency exchanges to operate in Hawaii. As a result, these exchanges are permitted to operate without a license, and can accept the buying and selling of bitcoin. Since launch, DCIL has grown to include 15 bitcoin exchanges which is a small step forward with Hawaii moving towards an open cryptocurrency market.
In deciding which of the 15 bitcoin exchanges to use, there are several factors to consider. Safety and Security should always play a part in considerations, but also with the trading strategy to mitigate any transactional fees. Lastly, for Hawaiians, you will not be able to trade in the full suite of cryptocurrency products that other states have easy access to, such as margin lending, options, and vast range of new altcoins on offer. Let’s go through each factor to consider.
🔒 Safety and Security
The first and foremost area to evaluate is the safety and security provisions of a cryptocurrency exchange. Since traders intend to provide their personal as well as confidential details (bank and credit/debit card details, address, cryptocurrency wallets etc.) to the exchange’s database, it should be backed by a strong and reliable security system. The exchange has to be efficient enough to deal with any type of malware or hacker’s attack.
📞 Customer Support
From a novice to a professional trader, everyone needs help/assistance in one way the other. Sometimes, they need someone to sign-up on the exchange or carry out transactions to ensure safety of their personal details. Also, the customer support has to be prompt, responsive, knowledgeable and most importantly, courteous to give respect to all clients, no matter how small or big they are. Their professionalism and legitimacy in answering questions is what wins the clients.
💳 Payment Methods
Cryptocurrency exchanges provide multiple methods to their clients to deposit or withdraw funds. From using debit/credit cards (Mastercard or VISA), e-payment options (PayPal, Skrill etc.) to making wire transfers, these exchanges ensure safety of traders’ money by hook or by crook. Also, their e-wallets are responsible to simplify transactions while you will have to bear some fees or charges.
🪙 Cryptocurrency Selection
Crypto selection is important for people who want to diversify their e-wallets and deal in fiat currencies. In other words, if you are planning to acquire Bitcoins against USD, then there is no need to worry about this element or vice versa. Like stock exchanges, the platforms should have a huge range of cryptocurrencies so that traders are able to make the decision which suits them the best. Whether they want to invest in bigger cryptos like Bitcoins, Ethereum, Ripple etc. or to play a safe game, a cryptocurrency exchange should have multiple options to choose from.
🏷 Coupons and Discounts
Based on their common purpose, coupons and discounts are intended to create a win-win situation by attracting more and more clients to start trading with them. For a good cryptocurrency exchange, these offers work as a marketing tool where they can reach maximum number of people and expect to get at least 50% responses within no time. traders are rest assured of getting discounts or reductions in transaction fees.
💰 Fees
There are two types of fees involved in cryptocurrency trading- payment fees and trading fees. The latter has been charges on the volume of cryptocurrencies being traded. The percentage usually decreases with the rise in volume. Which is why no exchange can be compared with the other.
⚙️ Platform Reliability
This point refers to an Exchange’s ability to remain functional even at the time of maintenance. The exchange should be protected against bugs so that it can run without hindrance.
📈 Liquidity
Without good liquidity it is hard to be able to sell, liquidate the earnings (or losses). It is important to have liquidity, if not then it could become a problem. Liquidity comes and goes. This is the same for any tradeable asset, like stocks. Trading in stock volumes increase and decrease seasonal and also broadly in alignment with how well the economy is performing.
A low volume exchange has risks that are two fold. One, you will need to bide your time in order to sell for the right price. Low volumes will make this difficult, and especially if you urgently need to sell this could cause you to lose some of your profits. Secondly, a low volume exchange is prone to market maniuplation. The larger holders of the coin, could possible move the market, but it more than likely causes volume voliatity on the exchange.
Hawaii Bitcoin Exchange Reviews
There are only 15 bitcoin exchanges that are allowed to accept Hawaiians. Having said that, we are well aware that Hawaiians can sign up to exchanges that are situated offshore. To be clear, Hawaiians are legally allowed to sign up to buy and sell bitcoin at offshore exchanges, but the State does not encourage you to do so.
Offshore exchanges reside outside of the State laws, and therefore do not need to comply with licensing requirements.
Knowing this, we review the bitcoin exchanges that can accept Hawaiians.
Coinbase
Referred to as the top Bitcoin broker (BTC), Coinbase has always been the preference of beginners to try out their luck by investing in cryptocurrencies. Due to its simple user-interface and easy to handle mechanism, this cryptocurrency exchange has emerged as the best platform for all Bitcoin and other cryptocurrency fans. They can carry out transactions with SEPA transfer, bank transfer, debit/credit card. with the surety of buying highly liquid cryptos. The best part is that if any trader wants to buy cryptocurrencies urgently, he/she can do it through Instant Buy with a debit card.
Coinmama
Coinmama is the next worthwhile cryptocurrency exchange that works for its clients effortlessly. The best part is that it is available for everyone across the globe, which means that people from anywhere can easily invest or transact in digital currencies. Its transaction fees depend upon the volume of purchase; however, money can be paid through SEPA transfer at a lower fee. Another thing that makes Coinmama a good option is the highest limitation for dealing in bitcoins, especially while using credit cards. The exchange has proved itself a reliable and professional platform where traders can invest their money with ease.
Etoro
Etoro is on the mission to democratize money management to open doors of financial market for everyone. Its US platform intends to bring in modern and advanced techniques and norms, while continuing to support cryptocurrency trading. Etoro lets traders to deposit funds through wire transfer, online bank transfer, bank card or e-wallet (Skrill, Neteller or PayPal), where the minimum deposit is $50. The best part of Etoro is that customers can withdraw funds whenever they want without having to pay the platform fees.
CEX.IO
As a multifunctional cryptocurrency exchange, CEX.IO has been the choice of millions of people across the world. It facilitates in the purchase of bitcoin with debit or credit card; though, if they want to use any other payment option, they can do that easily as well. Their customer service is active 24/7 with proven platform reliability and stability. The best thing about CEX.IO is its low fees and accessibility to people all over the world so that they can easily opt to invest in cryptocurrencies of their choice.
Kraken
Kraken is not only a top rated crypto-exchange in Alabama but has also managed to get into limelight of the world. It is because of their liquidity and volume that any bank or wire transfer can be the part of their funding method. Kraken Pro encourages investors to get themselves involved in real-time trading by using amazing charting tools. Their tiered verification and reasonable fees are two main factors as to why this platform has got a respectable position in the industry.
Gemini
Gemini has fast settlement, which is good if you are a day trader. Fast processing of ACH and wire transfers in only hours to one day then can immediatley buy and sell bitcoin. Fees are reasonable.
LocalBitcoins – Peer to Peer Exchange
Known for providing an escrow service, this cryptocurrency platform enables clients to find the right buyers for their Bitcoins. Although advertisement is a good option to go with, many have not received the required level of responses. The thing that makes LocalBitcoins different from others is the in-person meeting, which is facilitated and secured by LocalBitcoins have turned out to the fastest platform to acquire Bitcoins within a few minutes.
Bitcoin ATMs
With the help of Bitcoin ATM, it’s quite easy for potential investors to buy bitcoins whenever they have enough funds available. They make the process so quick and easy that traders used to wonder whether things have been done properly or not. It is worth mentioning that Bitcoin ATMs charge between 5% to 10% fees against providing privacy, security and convenience of keeping personal and other details in private. This fee is literally worth the features traders will be getting.
Hawaii Cryptocurrency Tax Ruling and Rates
All resident of Hawaii that buy and sell bitcoin are required to pay tax to the IRS on any capital gains/losses and earnings. The IRS deems the trading of bitcoin as a virtual currency and as an asset that has monetary value. Therefore, buyiing and selling bitcoin is to be treated in the same manner as foreign currency exchange. IRS requires the submission of tax to include details of date, buy, sell and exchange units, value, gains and losses. It can become an onerous task for high volume traders, however, many bitcoin exchanges now support the provision of the IRS 1099 Form information.
Bitcoin Cryptocurrency Laws and Legislation
Lawmakers in Hawaii have been able to pass through legislation that permits the licensing of bitcoin exchanges. However, the requirements are extensively onerous that it does not allow exchanges to realistically operate. One Senate Bill was passed – SB 949 – which first defined “virtual currencies” in the Hawaiian Money Transmitter Act. Subsequently, the Hawaiian Division of Financial Institutions implemented a framework of licensing for all cryptocurrency exchanges.
One of the requirements per the Money Transmitter Act, is that all bitcoin exchanges must hold the equivalent or more of physical US dollar cash for bitcoin held by customers. The cash is to be held in a trust account, as a safety measure for customers of the exchange. This is all well and good for the protection of customers, however, the capital constraint of vast amounts of cash in a trust is commercially not viable.
As a result, many bitcoin exchanges determined that operating in Hawaii was not possible under the new licensing regime.
Other requirements, which are not as onerous, is that bitcoin exchanges must advise customers of the dangers of trading in bitcoin. 2019 HI S.B. 1364 (NS).
In an effort to remove the stringent capital requirements, the Senate introduced SB 3082 to amend the Uniform Law Commission’s Regulation of Virtual Currency Businesses Act to exclude capital. However this bill has stalled and did not progress further. Subsequently many other bills have been introduced in an attempt to amend, however, to date, all efforts have failed.
As mentioned previously, in 2019, an alliance of bitcoin exchanges was formed under the DCIL banner. They proposed to the Division of Financial Institutions the operation of bitcoin exchanges without a formal license, but under strict monitoring by the department. The DCIL alliance, proposed to demonstrate how bitcoin exchanges could be operated, yet still protect customers.
Bitcoin and Cryptocurrency Wallets
Some exchanges also offer wallets. It’s not necessary for a good exchange to offer a wallet to their clients, though it can be a nice to have for new investors. However, be aware that online wallets offered by exchanges are normally hot wallets. That is, these wallets are connected permanently to the internet. This can be quite risky to use a wallet that is controlled by the exchange and not by yourself.
Hence it’s not necessarily a good thing if an exchange offers a wallet, but it’s a nice to have, if you are looking for an exchange with their own wallet.
- Online Wallets: Every crypto-exchange has their own wallet where traders can store their coins or cryptocurrencies for as long as they want. However, there are two types of these wallets that traders have to decide about which wallet they want to use for their trading.
- Hawaii Hot Wallets: Since the inception of bitcoins and other cryptocurrencies, wallets have been transformed and divided into two forms- desktop and online. Digital wallets are free and can hold any cryptocurrency that traders want. They enable them to get easy access to their cryptocurrencies via mobile devices. They are perfect for beginners who want something easy to start with.
- Hawaii Cold Wallets: These specifically designed devices work as physical cryptocurrency storage that allow traders to bring their cryptos with them, no matter where they are going. Though, the only considerable thing is their expensive nature with limitations of storing certain cryptocurrencies for future use.
Minimum Legal Age
The minimum legal age in Hawaii to buy and sell bitcoin is 18 years old.
Summary
Hawaii is a state that has stalled with opening the cryptocurrency market to bitcoin exchanges. The law currently does permit bitcoin exchanges to operate with a Money Transmitter License, however the captial requirements of too onerous to make it commercially viable for bitcoin exchanges to operate. As a result, a consortium of 15 bitcoin exchanges have been allowed to run a pilot program (legally without a license), to demonstrate how bitcoin exchanges could be run in Hawaii while continuing to protect customers.
Buying and selling of bitcoin is therefore restricted to 15 bitcoin exchanges in the DCIL program. However, residents of Hawaii are able to sign up to offshore cryptocurrency exchanges lawfully.
How to Lodge a Cryptocurrency Customer Complaint
If you have a customer complaint at a cryptocurrency exchange, please raise the issue with them first.
If unresolved, please contact the State Finance Department.
Department of Commerce and Consumer Affairs – Division of Financial Institutions
335 Merchant Street, Room 221
Honolulu, HI 96813
Email: dfi@dcca.hawaii.gov
