At a time when most countries are mulling over the use of cryptocurrency, one nation has gone ahead and declared their new cryptocurrency as the sole national currency. The Marshall Islands recently signed a bill to declare “The Sovereign” (SOV) its new official cryptocurrency, replacing the U.S. dollar.
The Marshall Islands have signed the change into law to make the Sovereign the official legal tender for businesses and the 53,000 citizens of the nation. It is believed that the U.S. dollar will still be accepted on the Marshall Islands, and the SOV will be seen as the nation’s official legal tender. The island has been a republic since 1982.
It must be noted that the bill was signed into effect in March, but the news is making waves only now. At the time, the government issued a statement, saying: “This creates legal certainty for its use, because all jurisdictions have laws in place for dealing with legal tender, whereas private cryptocurrencies are dealt with differently in different jurisdictions.”
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Further, in February, officials from the country confirmed that the Marshall Islands would soon issue a cryptocurrency, which would be legal tender.
Speaking to Reuters, David Paul, minister-in-assistance to the president of the Marshall Islands, said, “As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form.”
As of now, there are not many details on the Sovereign. There are reports that the coin will be launched through an initial coin offering, and the maximum supply would be 24 million tokens (to protect against inflation and reflecting Marshall Islands’ 24 municipalities). There will likely be a presale as well, but more details are still awaited.
A report previously claimed that the said cryptocurrency is developed by an Israeli fintech company, Neema. The project of pitching it as a national currency was the brainchild of CEO Barak Ben-Ezer, who approached nations without their own national currency. The Sovereign will be based on the “Yakwe framework.” Users will have to identify them on the blockchain to address the anonymity problem, which has been a limitation of Bitcoin.
The Marshall Islands have a bad reputation among the financial services industry, and is seen as a tax haven and a safe route for money laundering. Hopefully, the use of a cryptocurrency would help the nation shrug off this image.
“While there is understandable concern by policy makers and regulators worldwide of the misuse of cryptocurrencies for tax evasion, money laundering, and terrorist financing, the SOV is designed on purpose to be unusable for these purposes,” said Paul, according to TNW.
A person will have to fully identify themselves for buying the token, including presenting a government ID and a biometric marker. So, the chances of being anonymous would be reduced drastically. Going forward, the government plans to develop an infrastructure where people (including tourists) can easily buy SOV via exchanges.
Marshall Islands’ decision to issue a cryptocurrency to somewhat replace the U.S. dollar can also be linked to budgetary concerns. Presently, the U.S. grants $60 million to the island nation in foreign aid annually. However, in 2023, that number will drop to $30 million, a big loss for the country, where the entire budget is $100 million.
So, to address this drop in aid, the country plans to put 50% of the proceeds from the initial coin offerings into a national trust fund. The balance will be divided into three areas with 20% going toward the fund supporting those affected by the U.S. nuclear tests. About 10% will be placed in the Green Climate Fund, and the remaining 20% will be distributed to the citizens in the form of SOV.
Marshall Islands is a sovereign state and U.N. member, and thus, its decision comes as a big encouragement for the crypto industry. The news of a cryptocurrency becoming legal tender of a sovereign nation was shared by CNBC Africa cryptocurrency trader host Ran Neuner. The expert noted that now big financial institutions like banks and Visa will have to support cryptocurrency as it is now a national currency.
If a sovereign nation, not under sanctions, part of the UN has a legal tender in their country, the banks must support it. Here are some docs showing that Marshall Islands meets all criteria and has signed a bill in parliament creating the world's first sovereign crypto currency pic.twitter.com/Cf4eaJuODT
— Ran NeuNer (@cryptomanran) May 22, 2018
Year 2018 has been seen as a period of massive adoption of cryptocurrency. Venezuela, in February, issued its own oil-backed cryptocurrency called the petro. Also, countries like China, Estonia and Iran are discussing plans for releasing their own digital currency.
Now that a nation has accepted it as its national currency, the pace of the cryptocurrency adoption is set to accelerate. It will be interesting to see how the Marshall Islands will sort out the technicalities of replacing a cryptocurrency with the U.S. dollar.