The Marshall Islands, the remote archipelago in the Pacific best known for its shipping industry and home to 53,000 people, is developing plans to introduce its own digital currency which, unlike similar cryptocurrencies now available in many countries, will be legal tender for citizens and businesses on the island.
If the launch goes as planned, the sovereign, or SOV, will be traded alongside the local physical currency – since 1982 the US dollar – in what could prove to be a world-first experiment in the viability of digital payments, built on and controlled by the blockchain, to underpin an entire economy.
Barak Ben-Ezer, CEO of Isreali fintech company Neema, pioneered the idea and set out to persuade sovereign nations that do not trade with their own currency to adopt the idea of a digital-only system. Some view the Marshall Islands’ readiness to adopt the currency as a measure of its desire to shake off an erstwhile reputation for money laundering, and champion a progressive and, it argues, traceable system for everyday payments and transactions.
The currency has the full backing of the Marshall Islands’ government. Once launched, the two currencies, the sovereign and the US dollar, will co-exist for the time being, and the government says it has “no plans” as yet to withdraw the dollar from circulation.
A handful of other countries have set up similar projects. Venezuela has the petro, a tradeable cryptocurrency aimed at circumventing US sanctions on its economy.
David Paul, minister in assistance to the president of Marshall Islands, explained the attraction of the sovereign cryptocurrency, pointing out: “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.”
Unlike traditional hard currencies, cryptocurrency transactions are recorded on the blockchain, a ledger whose unique coding is regarded as extremely secure. Cryptocurrency wogs are divided between those who laud the security of currencies such as bitcoin, and those who warn the built-in anonymity gives rise to criminal behaviour.
The brave new experiment now underway in the Marshall Islands could go some way to settling the matter once and for all.