We investigate the density-shear instability in Hall-MHD via numerical simulation of the full non-linear problem, in the context of magnetar activity. We confirm the development of the instability of a plane-parallel magnetic field with an appropriate intensity and electron density profile, in accordance with analytic theory. We find that the instability also appears for a monotonically decreasing electron number density and magnetic field, a plane-parallel analogue of an azimuthal or meridional magnetic field in the crust of a magnetar. The growth rate of the instability depends on the Hall properties of the field (magnetic field intensity, electron number density and the corresponding scale-heights), while being insensitive to weak resistivity. Since the Hall effect is the driving process for the evolution of the crustal magnetic field of magnetars, we argue that this instability is critical for systems containing strong meridional or azimuthal fields. We find that this process mediates the formation of localised structures with much stronger magnetic field than the average, which can lead to magnetar activity and accelerate the dissipation of the field and consequently the production of Ohmic heating. Assuming a 5 × 1014G magnetic field at the base of crust, we anticipate that magnetic field as strong as 1015G will easily develop in regions of typical size of a few 102 meters, containing magnetic energy of 1043erg, sufficient to power magnetar bursts. These active regions are more likely to appear in the magnetic equator where the tangential magnetic field is stronger
