The Marshall Islands plans to issue a national currency on the basis of the blockchain, replacing the United States dollar as the primary currency.
The sovereign coin (SOV) was announced by Assistant President of the Marshall Islands David Paul and will be a blockchain-based cryptocurrency distributed and operated by the Marshall Islands government.
The Marshall Islands had passed a Sovereign Currency Act in 2018, declaring its intent to release its new national digital currency. The nation, which has been independent since 1979, has until now been using the United States dollar as the official currency for all payments, debts, public charges, taxes and dues.
Even simple things like acquiring and installing ATMs become complicated when you’re in the middle of the Pacific Ocean!"
The state's reliance on US grants is estimated to total around $70m each year.
Minister Paul said that the choice of blockchain over a centralized system was made due to one simple reason. The country has a little over 50,000 people spread across 1000 Islands in the Pacific, and a centralized system would not be able to work.
The currency will also help in minimizing the cost of remittance services that are still very high in Marshall Islands.
"Many of our citizens send or receive money using remittance services, paying fees of up to 10% per transaction. Even simple things like acquiring and installing ATMs become complicated when you're in the middle of the Pacific Ocean!"
Beyond decentralization, blockchain offers the country the possibility of having compliance "baked into the currency protocol itself," — in the minister's words — "while maintaining privacy for individuals."
"It is crucial that individual users should have a reasonable expectation of privacy - specifically, the ability to choose when to disclose your information, what exactly to share, and with whom," he said.
Approved entities — such as banks or exchanges — will be tasked with verifying the identity of SOV users, thereby closing anonymity loopholes.
Paul is expected to announce further developments relating to the SOV at the Invest: Asia 2019 cryptocurrency conference in Singapore starting on September 11.