Islanders’ plans for a cryptocurrency still on cards after vote of no confidence

President of the Marshall Islands is riding out widespread criticism to allow the 50,000 people of the volcanic atoll to have access to their own decentralised currency

Advanced plans to create a cryptocurrency serving the people of the Marshall Islands has survived a crucial vote forced by island leaders hell bent on derailing the project.

President Hilda Heine – President of the Republic of the Marshall Islands – faced a vote of no confidence from the island chain’s senators who claim the idea of the ‘Sovereign’ (SOV) involved too many financial risks.

The independent Micronesian nation has strong historical and economic ties with the US, and uses the US dollar as currency. Several political leaders of the islands fear the SOV could erode those relations and, indeed, use of the dollar.

Reputation damage

They moved to topple Heine with a vote of no confidence earlier this week, but the 67-year-old survived by a single vote. She faced accusations of damaging the reputation of the Marshall Islands by backing the proposed implementation of the SOV.

In the wake of the minor crisis, Finance Minister Brenson Wase has now been instructed to press ahead with advancing plans for the SOV.

He has stated that the Marshallese government will look to raise funds for the project by offering up 50% of the SOV’s opening allocation to foreign investment. The other half will be held in a trust fund or possibly distributed to more than 50,000 citizens who live on the Marshall Islands.

Ministers have already approved the ICO as legal tender, but a date for its launch has yet to be announced.

Different jurisdictions

“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,” explained David Paul, minister-in-assistance to the president.

The road ahead still doesn’t look entirely smooth for the SOV, however. A detailed report by the International Monetary Fund (IMF) urged for caution, stating there were several risks involved.
“The Marshallese authorities are well aware that issuing a legal tender cryptocurrency puts RMI into uncharted waters, and that there are many risks involved in issuing the SOV,” it said.
“However, they believe they can work through these issues.
“They have created a high-ranking committee to examine all the risks, including those raised by the IMF and the US Treasury, and those discussed during the public hearings on the legislation.”

Long-held concerns

IMF officials highlighted the long-held concerns of several ministers that the financial reputation of the islands and its relationship with the US dollar could be harmed.
The report continued: “Given these sorts of issues, the authorities expect it will take a few years to issue the cryptocurrency.
“Moreover, they will only issue the SOV once its use complies with the FATF (Financial Action Task Force) standard and US regulation, and once its use in transactions in the US financial system has been approved by the US government.”

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