Marshall Islands announces national cryptocurrency pre-sale
In this case, taking things slow and steady could still bring rapid change.
The Marshall Islands announced the world's first ever legal tender cryptocurrency in March 2018. It's called the Sovereign, or Sov to its friends.
It's been a rough road since then, with the IMF cautioning the Marshall Islands against pursuing the cryptocurrency, due to concerns about whether it could further deter the banks who were already pulling out of the region.
Ironically, this risk was actually why it was created in the first place.
Where the Sov came from
"We face a lot of challenges in order to try to provide what is best for the future of the Marshalls," explained David Paul, minister and assistant to the president of the Marshall Islands at Invest: Asia "Among the challenges we have is being able to access the global financial system."
"Right after the attacks on the World Trade Centre back in 2001... the Marshall Islands were actually marginalised to the point where we were not able to gain access to many of these financial services."
He's referring to the post-9/11 atmosphere which required banks to start scrutinising payments and customers more closely, with the effect of raising compliance costs.
These elevated compliance costs pushed certain locations below the threshold of profitability. The Marshall Islands was one of these locations. In its case, it was left with only one correspondent banking relationship with the United States.
"The sov will be introduced alongside the US dollar in parallel," Paul explained. "There's really no correlation as far as the value is concerned."
It will also be algorithmically steadied at a 4% annual inflation rate "which is why it's sustainable," Paul said.
The annual inflation will be distributed proportionally to all existing Sov holders.
While Sov purchasers will be required to pass AML/KYC checks, the currency aims to bring a level of privacy to users.
"It's very easy to use and manage and regulate, and is actually auditable," Paul noted.
The journey to launch hasn't been without roadblocks though, which included a lot of IMF scepticism, and internal scepticism among Marshall Islands decision-makers.
Even pushing it this far down the road has cost a lot of political capital, Paul said.
"As a country, we have one shot at this," he said.
"This is not a typical idea where if it fails you go back to the drawing board... this is really about the reputation and integrity of a nation here. The reason we're doing it gradually and in phases – we want to make sure we're all comfortable in what we do."
Slow and steady
The high stakes nature of the project and the controversy around it mean the token issuance will take place through a gradual pre-sale, beginning with an 18-month period of optioning.
The start date of the pre-sale is still up in the air, but is expected to begin in late 2019, Paul said. From there, the actual token issuance is due in 2020.
This may help give it some more time for regulators to solidify a strategy around a more tangible product.
"It should be acceptable, especially among the regulators," Paul said. "We're not really going to commit to a certain timeframe with respect to the regulatory aspect of it."
"Given the special relationship we have with the United States we feel it is very important for us to be in lockstep with the US Treasury... we are mindful that we need to make sure our correspondent banking relationships are not jeopardised."
This cautious approach has seen some thawing in the frosty attitudes some US treasury officials initially had towards the project.
"When we first met them... the deputy assistant of the treasury told me point blank 'we don't want this, we don't like this and we don't support this.' Now it's like 'we think this can actually work'," Paul said.
Paul also sees the Marshall Islands' Sov project as a way of helping the island adapt to the next generation of technology, and he expects it to be a valuable tool for educating and upskilling islanders.
It wouldn't be the first time the Marshall Islands has gone through this process, he notes.
"When we first gained independence back in the 1970s, we never really had any electricity back in the country," he said. "When our first president and cabinet of the country went out and got generators and transmission poles... there were no electricians and mechanical engineers and all that."
And now there are.
"This is the same thing," Paul said. "We may not have that capacity right now, but we have the people... we can build that capacity and train the Marshallese to be software engineers and all that... we can make that transition into the digital era."
"It's a very transformative process altogether."
"I don't think the world has ever seen something like this, from a small island like ours. The internet, the world wide web, is really the equaliser for a small country like ours."
Disclosure: The author holds BNB, BTC at the time of writing.
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