When　faults　occur　in　transformers,　the　fault　currents　usually　contain　large　dc　offsets,　which　may　cause　the　iron　cores　of　current　transformers　(CTs)　to　be　saturated.　This　may　cause　distortion　of　the　current　waveforms　in　the　secondary　windings,　resulting　in　false　responses　in　differential　protection　(DP)　relays.　The　study　proposes　a　new　Hall　DP　relay　(H-DP　relay)　by　using　a　coreless　Hall　current　sensing　device　and　an　innovative　current　diagnosis　algorithm　based　on　2nd　order　harmonic.　The　new　design　can　enhance　the　speed,　sensitivity,　and　selectivity　of　relays　when　faults　occur.　The　proposed　technology　has　been　verified　through　experimental　tests　in　the　laboratory.　Based　on　the　percentage　of　2nd　order　harmonic　to　fundamental　component,　fault　currents　and　inrush　currents　can　be　identified　accurately.　Moreover,　without　iron　cores,　the　new　current　sensing　method　has　no　saturation　problems　which　exist　in　traditional　CTs.