 Welcome to Connecting Hawaii Business on Think Tech Hawaii. My name is Kathleen Lee, and I am your host for this program. You can catch all of our Think Tech Hawaii shows on ThinkTechHawaii.com, as well as on Think Tech Hawaii's Facebook and a YouTube channel. Today, I am excited to have my friend on the show, Ellen Ng, who is the Economic Development Specialist for Hawaii Technology Development Corporation, or HTDC. And we will be talking about HTDC's Digital Currency Innovation Lab. So, Ellen, welcome to the show. Hi, yeah. Thanks, Kathleen, for having me today. And thank you for being willing to come on today's show. Tell our viewers about yourself. Sure. So, you know, my name is Ellen, and I'm the Economic Development Specialist here at HTDC. You know, I manage a couple of programs, you know, one of it being the e-commerce and digital marketing program that ran through the pandemic, and the other one that we are talking about today on Digital Currency. Awesome. Let's take it back a notch. I think you kind of described it already. So, HTDC, could you give a brief description on what it is? Yeah, sure. So, HTDC, the Hawaii Technology Development Corporation, it's a mouthful, I know. We are a state agency that's attached to the Department of Business, Economic Development, and Tourism. And, you know, our mission is to fuel, you know, Hawaii's tech and manufacturing economies, you know, to grow well-paying jobs in technology, and, you know, to tech-enable companies here in Hawaii. So, we're doing it in a couple of ways from capital provisions, such as grants and sponsorships. We have infrastructure support, such as the co-working space in Kakako called the Entrepreneur's Sandbox, and we have another co-working facility in Maui as well. Wonderful. So, tell us about the Digital Currency Innovation Lab and your role with it. Sure. So, the Digital Currency Innovation Lab is a partnership, I would say, between HTDC, my agency, as well as the Division of Financial Institutions, the FI, in short, that sits under DCCA. So, it started out in 2020 as a two-year pilot program, you know. And, you know, the mission for the DCAL, or, you know, in short, that stands for the Digital Currency Innovation Lab, is a couple of, there are a couple of things that we wanted to look at. The first and foremost, you know, given the current regulatory system here for financial institutions in Hawaii, a lot of the crypto companies are unable to participate here in Hawaii and operate here in Hawaii. We can get into the details, you know, if there's interest. But there was the main kind of, I would say, motivation for starting the lab is to, you know, create a sandbox for cryptocurrency companies to do business here in Hawaii, you know, in exchange for no action passed against them by the commissioner, Iris Ikeda. Another thing that we wanted to also understand was, you know, what are the development, or economic development opportunities that these crypto companies would bring about here in Hawaii? And, you know, again, also, you know, through this lab, you know, offering a layer of consumer protection as, you know, Hawaii's residents are, you know, engaging with these digital currency companies that, you know, are allowed to operate here in Hawaii. Oh, and my role, yeah. So I'm the program manager for it, you know, so I manage a lot of the correspondences coming in from the public, but also run the program as well, you know, on the whole in partnership with DFI. Okay, so you'd be the perfect person to ask all these questions. For those out there who may not know or may have a vague idea of what digital currency is, what is it? So, you know, digital currency, you know, we were actually interestingly going back and forth when we were setting up the lab in terms of, you know, what would be the best way to represent kind of, I would say, a broader, you know, perspective of, you know, what's happening in this whole crypto space. And, you know, we settled on, you know, the name digital currency because we felt that it was most all-encompassing. So, you know, digital currency, or in another words, virtual currency, basically refers to, you know, currency that is available exclusively in your electronic form, right? And it's, you know, can be considered a medium of exchange, you know, with varying values. Some might have more value than others, but in nutshell, it's, you know, a currency in electronic form. There's no physical representation of it. One thing, though, you know, I would have to say as digital currency, as I mentioned earlier, is an umbrella term, an all-encompassing term. But if you look at, you know, the lab specifically, a lot of it is more focused on cryptocurrency. So, within the digital currency realm itself, there are actually three, we call it three buckets of currencies, one being cryptocurrency, the other, we call it stable coins, which some people say, you know, kind of is a subset of cryptocurrency and the third one being in short CBDCs or central bank digital currencies. But for the purpose of this lab specifically, we focus a lot on cryptocurrencies. Okay, so how did you and HTDCs select the companies that made up the cohorts for the program? Yeah, so it wasn't a selection process, right? So as the state government for us, it's I think most important to make it, you know, fair, transparent and inclusive. So it was actually more an application process, which started, I think we put out a call for applications in March of 2020, where basically any crypto-based company that was interested to do business in Hawaii could apply, you know, to be admitted into the program and they would, you know, undergo a due diligence process that was undertaken by the Division of Financial Institutions, with documents that we required, you know, as part of the due diligence process, such as, you know, the technical and security requirements, the business plan, in terms of what they were, you know, looking to do in Hawaii, their terms of service, you know, and things of that nature. So we actually held the first round of applications in between March to, I remember it was between March to April of 2020, and you know, after that the due diligence process set in and in August of 2020, there were 12 participants that met the requirements of being in the lab, which we then admitted into the program itself. So as of today, you started out with the 12 program participants, what, how many program participants are there now? Yeah, so that was actually back in August of 2020, there was just cohort one where we admitted 12 participants. Unfortunately, one of the participants had, you know, to drop out of the DCIL for not adhering or complying to some of the requirements. So we had 11 at the end of 2020. In January of 2021, we reopened applications for cohort two. So there were actually four companies, there were more companies that applied, but we only admitted four companies into the lab at a time, which made it 15 companies actually through the entire two-year term of this DCIL. So the DCIL actually was scheduled to close in June of this year because of, it came to the end of its two-year term. However, you know, again, we can talk about this because of, you know, the high number of customer accounts that are crypto-based accounts that were being opened here in Hawaii. We felt that it was, you know, in the best interest of our consumers to extend the program. So, you know, we kept, we offered the 15 companies to continue participation, but at a point in time where we made that offer, four companies decided to withdraw from the program and from operating in Hawaii specifically. So we're actually down to 11 companies right now that are actively operating in Hawaii. Okay, so you kind of launched into my next question. So, and you mentioned it already. So what is the significance of the extensions of this pilot program to another two years, to Hawaii consumers? Yeah, sure. So, you know, what was interesting, and you know, we didn't really anticipate that going into this program, but what was interesting was the huge appetite, you know, that Hawaii residents had for crypto. So, you know, again, there was actually a study that was shared and published, I think around September of last year, and it was, I think it was a study that was done by A to Z markets. And what was interesting was, you know, Hawaii was actually ranked at seven as one of the most crypto obsessed states in the nation. So, you know, as a relatively small state, it says a lot in terms of the demand and the appetite for crypto and being involved in crypto. But again, just based on the numbers that we had, because, you know, in exchange for being in the lab, the companies that were participating had to give us, you know, information or data of customer activity for their respective companies. So, you know, we could tell what was happening on the ground. And as of the end of first quarter of this year, actually, we had about 146,000 customer accounts that were open across the 11 participating companies in the lab. So for us, you know, it was really, okay, how can we enable Hawaii's residents to, you know, effectively participate in this crypto economy, even though we don't have, you know, a regulatory scheme around, you know, allowing crypto businesses to operate here right now. And, you know, Hawaii's not the only state that has this problem, right? It's a nationwide problem. Some states just take the easy approach of not, you know, having any regulation, but then in the trade off for that is, you know, very little consumer protection. And, you know, if you look at the crypto market today, you know, across the last couple of months, you know, there have been a lot of bankruptcy filings and mishandling of consumer funds by crypto companies, you know. So I think Hawaii being, you know, I think, you know, I would say we are definitely more conservative, but with the best interest of, you know, I would say the collective, you know, in terms of Hawaii's residents to have this program in place and allowing it to continue for a second to your term. Okay. So why should, and you already mentioned that Hawaii, there is great interest in Hawaii for that, but let's, let's go over why Hawaii residents should pay attention to digital currency. Yeah. So, you know, I think digital currency, again, you know, people think Bitcoin, Ethereum, you know, and all the alternative coins, a lot of people think of it as a form of investment. I think that is the layman and, you know, the men on the street kind of perspective, but you know, I think what's more important is really looking at the underlying technology, which is driving the crypto economy, which is blockchain technology. And of course, you know, that leads into the whole other space of web three, which we probably wouldn't want to touch on today because it's, you know, it's just so much, but kind of looking closely at the use cases of blockchain technology and what that means for Hawaii, right? So I think one easy example that, you know, you know, in the case of the digital currency innovation lab, you know, crypto is very much intertwined with something called NFTs as well, non-fungible tokens, right? And I think what was interesting was that, you know, if we look at NFTs, you know, it's another lever for economic, you know, development opportunities for, you know, different pockets of, you know, communities here in Hawaii from artists, you know, to nonprofits, even to companies. So far, I mean, I would have to say the artist community is probably the most active in leveraging NFTs here in Hawaii. And, you know, we have seen a couple of successful case examples that have come up with some of the more prominent artists here in Hawaii. But, you know, in the DCIL, we ran our own kind of NFT for good, where we use NFTs as a form of a fundraising mechanism in collaboration with, you know, our artists, local artists here in Hawaii. You know, we raised some funds, which was great, but I think it was like $27,000, you know, in about 24 hours, just through the sell out NFTs that were created by our artists. And that was donated back to a nonprofit, a percentage of that, not the total amount. But, you know, like it's really a win-win, I would say, outcome for artists, for nonprofits, you know, as a whole. And I think another way to look at it would be, in the case of our nonprofits, for example, some of them have started accepting cryptocurrency as donations, you know, I can do a shout-out to, for example, Hawaii Theater. So if anyone, you're listening into this and, you know, you want to get some tax benefits from donating crypto, Hawaii Theater accepts crypto. I think Central Pacific Bank Foundation accepts Bitcoin, I believe right now. Purple Maya is another nonprofit that I know of that accepts crypto. So, you know, in the case of Hawaii Theater, for example, we actually did a case study and talked to them and we found that a lot of their funds came in from outside of Hawaii. So, you know, it's, again, if you look at it, it's, you know, another stream of economic opportunity that probably wouldn't, you know, be available, right? To us, you know, without cryptocurrencies being in place. So, you know, again, digital currency is important, but, you know, again, I think it's how we use it outside of investment that makes it interesting. I think in a broader view, you know, just outside of Hawaii in general, you know, the whole idea of digital currency being, you know, easy to move, right? Because it's not like go bars or like cash that you have in your wallet. You know, I think it provides a lot of opportunities for financial equity in terms of access. So if you're living in some places where you can't get, you know, a hold of currency, paper currency easily, digital currency is something that, you know, would be the best alternative for you when it comes to, you know, having access to finance, right? And in terms of blockchain technology, for example, another one that's really interesting, I would say, would be this whole idea of digital identities. So if we look at, you know, what's happening with each of our own individual identities today, it's actually a very fragmented and broken system. You know, depending on who we are and which organization has our information, we may be presented in very different lights with each organization. So, you know, for example, if you did a name change with the first, with a bank, right? For example, the other banks probably wouldn't know of this name change unless you went to all the other banks that you have accounts with to do that change. So, you know, the whole idea of digital identity or having a digital identity on a blockchain where it's public and it's secure, you know, and it's accessible, for example, by other financial, you know, institutions that can gain access to it at a single time, you know, could be groundbreaking in terms of how you manage, you know, your digital identity going forward in the future. So these are just some use cases, you know, again, I think the space is still very nascent and there's a lot of developments. But yeah, you know, I think I personally think it's a very exciting space. There's a lot of room for Hawaii to participate in from, you know, even from a workforce development perspective, if you are in technology or a developer, you know, getting into this space requires a whole new set of skills that you have to learn. So, you know, forest also means more jobs, more opportunities that will come forth in the next upcoming years. So for me, you're one of the most diverse individuals I know when it comes to digital currency. How, like, what piqued your interest in it? Well, I mean, I got thrown into the space by having to manage the program. So, I mean, it wasn't fun. I mean, I have to admit it, it wasn't fun at the beginning because it was so new and it's very contrarian to what we are used to currently in technology, right? So, if you look at what we have now in the space, a lot of it is we call it centralized systems or centralized platforms. So, like Facebook, Twitter, you know, they are centralized authorities on, you know, how news disseminates or how information disseminates, right? Banks are centralized platforms in terms of how you transact and move your money. But if you look at this whole Web 3 space, crypto space, it's basically the opposite of that. It's about decentralization. It's about removing central authorities and bodies and regulators, which makes it even more interesting because, you know, as HTTDC or representative of HTTDC, we are, you know, part of state government and we have a part of play in the regulation. So, I think what's interesting is like, how do we balance that, you know, in terms of allowing, you know, something, you know, which I kind of deem more contrarian initially with, you know, kind of my role in state government and offering space for it to flourish while maintaining, I would say no control, but I think governance might be a better word around it, yeah. As someone who has been part of the program since the beginning, what are some lessons that you have learned going through it up until now? Yeah, so I think I mentioned it earlier, right? Like, it's so, Nathan, that, you know, it's really scary. I mean, especially for people who are coming into the space and we have a lot of people from the public that come in and say, hey, you know, like, we want to learn about this. We want to learn about crypto, you know, like, how do I, for example, you know, what was funny was, you know, people coming in and saying, like, hey, you know, how do I open up an account, right? Or how do I buy a Bitcoin and put it in my bank account? And, you know, for it's like, it doesn't really work that way, right? So I think, again, it requires a lot of the retraining of the mines, you know, for, you know, just, I would say the lay person, but I think one of the big takeaways, you know, is for me, again, there was a lot of debate, you know, there's still a lot of debate in terms of how much consumer protection is needed when it comes to the crypto industry and, you know, Hawaii's residents and just kind of managing their program over the last couple of years. I have to say that, you know, I still think consumer protection is paramount, especially in a space that is this nascent and ever-changing and because there's very little guardrails and regulation, you know, it's really almost like a wall of West, right, right now. So, you know, I personally see it as the state's responsibility, you know, to make sure that, you know, we provide protection on a collective level rather than an individual level. And this is a debate that I've been having with a lot of people who call us and tell us like, you know, don't tell us how we should manage our money, you know, and I'm like, mm, well, I mean, you might be really smart, but unfortunately you're one of the smart ones out of 10 people, right? So we have to figure out how to help the remaining nine people to make sure they're okay, you know. But yeah, you know, I think that's something that really stands out for me managing this program. I think another interesting thing for us is that the companies that were participating in the program, right, we would think that, you know, because they're in a crypto space, like I said, it's very contrarian, you know, the whole idea of governments being involved is like out of the question, but it's not true actually because as we were working really closely with, you know, the companies that are participating in the program, a lot of them actually want regulation and they want to work very closely with us, the state regulators to figure out like how they can best operate, you know, and bring value to Hawaii's residents, right? And using this experience that they have with us, you know, as a learning experience, you know, in other markets as well. So that's another thing that was, you know, kind of, I would say interesting for us because, you know, we were kind of anticipating a lot of kind of pushback and so on from participating companies, but that didn't happen. So, you know, we were pretty active in engaging the companies in our program on a regulation, from a regulation perspective, on my side of things, you know, I worked a lot with them in terms of, you know, helping them engage with Hawaii's residents, whether it be, you know, hosting a webinar to, you know, to teach people about, you know, crypto or, you know, doing projects here on the ground with, you know, companies and so on. And I think the third thing that, you know, we, which I never really thought of, you know, when I started taking on this program is how crypto actually touched or is touching or will be touching almost every single individual, you know, in the future going forward because, you know, like I mentioned, most individuals look at it from an investment perspective, right? But throughout this program, we, you know, I've worked with nonprofits who are interested in the space. I've worked with artists or, you know, slash creatives, right, who are interested in the space. We have had small, medium businesses who are looking to innovate. For example, accepting payments in crypto, right? And then also the large businesses here, you know, in terms of how crypto would be affecting them in the future. You know, some of our financial institutions as well are looking very closely at crypto and thinking, okay, you know, what does this mean for us as a traditional financial institution? You know, would it, you know, our crypto, it's crypto going to be a friend or a foe, you know, to our existing business. So, and how should we incorporate it in, into, you know, our process of innovation going forward, right? So I think that was the other thing that, you know, again, starting out in the program, I never really thought, you know, it's going to be that vast in terms of, you know, touch points, but yeah, it's pretty huge. Is there anything else that you would like to add that we didn't, I know you can go on, but is there anything you'd like to add before we wrap up? No, I mean, like we're in the middle of crypto winter. So just a reminder to everyone, you know, again, as investors to not panic, you know, just, you know, watch the markets, but be very prudent in terms of how you engage in crypto right now. But yeah, you know, I think other than that, you know, I think if anyone has questions or yeah, you know, questions about the lab, about the crypto, the state of crypto here in Hawaii in general, you know, feel free to reach out to us. The website link, I think is on the screen. So if you have an email- Yeah, let's pull up the website so people have an idea. Just kind of briefly tell us of what's going on there. Yeah, so that's the website for the Digital Currency Innovation Lab. You know, we post major updates, you know, at the top of the page, of course, but if you scroll through it, you know, there's a list of participant companies. You know, you can also see, you know, some of the projects we've worked on, all the educational webinars that we have done since the pandemic in 2020, all the way to 2021 are on there as well. So if you wanna do some kind of like basic one-on-ones in crypto, you can watch, you know, the different webinars that, you know, some of our participant companies have helped us, you know, put on so that you can learn more about crypto. Ellen, thank you so much for joining us today. I know this was basic one-on-one, but I appreciate you coming on the show to talk about HTDC's Digital Currency Innovation Lab. And thank you to the folks at Think Tech Hawaii as well for making shows like this possible. Today we had Eric and Haley who helped us out with the program. Thanks to Jay Fidel as well. Until next time, aloha. Thank you so much for watching Think Tech Hawaii. If you like what we do, please like us and click the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram and LinkedIn and donate to us at thinktechhawaii.com. Mahalo.