Marshall Islands to issue its own national cryptocurrency
Marshall Islands snubbed the IMF and overcame initial US Treasury objections to its issue of a state-backed digital currency
The Marshall Islands cryptocurrency is now a thing. The tiny Pacific republic is about to fructify its year-long effort to escape dependence on the US dollar.
Formally known as the Republic of Marshall Islands (RMI), the US associated state will soon issue its own digital currency.
Dubbed the Marshallese sovereign (SOV), the crypto will launch through a token pre-sale known as a Timed-Release Monetary Issuance (TRMI). The island nation announced its crypto plans at CoinDesk’s Invest: Asia event, held on September 11, 2019.
The Marshallese sovereign (SOV)
After achieving independence in 1979, RMI has been using the US dollar as its currency. It is now going ahead with the plan to issue a sovereign currency in digital form and based on blockchain technology.
In 2018 RMI passed the Sovereign Currency Act authorizing the issue of the new SOV currency that will be used alongside the US dollar.
The key advantages which influenced this decision were:
- Being an island in the Pacific Ocean, RMI citizens pay exorbitant charges on foreign exchange remittances, as high as 10% per transaction
- Blockchain transactions, on the other hand, are fast, simple, secure, and cheap
- The only infrastructure needed for a blockchain-based digital currency is its network
- There is no need to manage the printing and processing of paper money
- Comprising just 50,000 people spread across more than 1000 Pacific Islands, the RMI doesn’t need a central bank – it needs a decentralized network
- RMI will find it easier to combat money laundering and financing of terrorism by automating much of the compliance burden through the blockchain network
- RMI will finally connect to the global financial system on its own terms
How SOV will work
The new national digital currency rests on a foundation of three planks:
- It will rely on blockchain technology
- The growth in the digital money supply would be predetermined and tamperproof
- Compliance would be an integral part of the currency protocol itself
(Source: Essay by The Honorable David Paul is Minister In-Assistance to the President and Environment, Marshall Islands)
“We chose to create a fixed money supply with fixed growth because fiat currencies can be remarkably unstable,” writes Paul. “For example, the Argentine peso recently fell 15% in a single day. Venezuela’s currency, for all intents and purposes, no longer functions at all.”
RMI’s money supply will grow at 4% each year, based on Milton Friedman’s k% rule. New SOV will be automatically distributed through the network. “This means that we in government cannot modify the money supply, and we cannot manipulate the value of our currency by printing more money,” says Paul.
Finally, all persons using SOV would have to be identified by an approved verifier such as a bank or an exchange. This identification will effectively safeguard the system from bad actors such as criminals and terrorists.
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