Marshall Islands national cryptocurrency is a go
The Sov has hurdled the obstacles before it, but the toughest may be yet to come.
The Marshall Islands raised eyebrows with proposals to create the world's first legal tender cryptocurrency – if you don't count the floundering Venezuelan Petro.
The plans looked set to halt though, when the International Monetary Fund (IMF) warned the islands to exercise caution. This warning was one of the catalysts for a subsequent vote of no confidence, in which Marshall Islands president Hilda Heine was accused of besmirching the country's reputation by getting tangled up in cryptocurrency – specifically, the Sovereign or Sov for short. It was to be the Marshall Islands national legal tender crypto.
Now Heine has survived the spill by a single vote, and Nikkei reports that Marshall Islands finance minister Brenson Wase has said the country will be moving ahead with the Sov, in appropriate consultation with the IMF and partners in Europe and the USA.
Red light, green light
Among other concerns, the IMF specifically pointed at the risks of money laundering and terrorist financing that may rise with the Sov and suggested that the currency might not have adequate countermeasures in place.
The carry-on risk there threatens the Marshall Islands' single remaining correspondent banking relationship, the IMF noted, as one of its chief areas of concern.
But as Wase said, the Marshall Islands was intending to meet requirements from the IMF and other international partners, and the Sovereign could be as reliably clean as needed.
However, there are still lingering questions around what exactly the Sov is for and how it will benefit people. The short-term goal might be to conduct a fund-raiser by selling the Sov currency through a method like an ICO as well as distributing them to citizens and towards government efforts. The long-term goal then might be to have a workable national digital currency.
To what end?
Marshall Islands residents can almost certainly benefit from a digital currency. The scattered nature of the islands puts many residents outside easy banking access, and the Marshallese diaspora sees an enormous flow of remittances head back to the islands from the United States. For perspective, remittances make up about 15% of the Marshall Islands' GDP.
A way of moving money more efficiently could be extremely beneficial.
The remaining points of contention might be around whether the Sov is the most suitable answer, and what the question really was in the first place.
It's not a stablecoin and so risks falling into the same volatility problems as other cryptocurrencies. Meanwhile, the Sov crowdsale has been marketed as a primarily humanitarian project for donors who want to meaningfully contribute to the future of the islands, rather than a digital asset that's practical in its own right.
And beyond its ability to raise money for the islands, the value of the Sov itself might be somewhat dubious. As the regulatory environment around cryptocurrencies keeps advancing, the Sov's key advantages of being a regulated, legal tender digital currency may be at risk of getting somewhat diluted.
As a fundraiser, it makes a lot of sense, and Heine has a solid track record of engaging foreign donors to help grow the island. But as a solution, it remains to be seen how exactly the Sov is more useful than, say, the Coinbase app used in conjunction with the USDC stablecoin.
But even if the Sov does go through, and then flops anyway, at least Sov contributors can rest assured that their (real) money is going towards a good cause.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM and BTC.