The Sovereign (SOV) digital currency looks set to become the first decentralized national digital currency. It could be used in the Marshall Islands on an equal footing with the US dollar. Such cryptocurrency as legal tender, even in a small state, is a larger step on the path to crypto-adoption.
Island State Passes Bill to Create SOV Despite IMF Objections
The Marshall Islands says it’s the first country ever to accept a cryptocurrency as national legal tender. It passed a key bill this week for SOV’s creation. According to reports by the publication Haaretz the plans had been hotly debated by Marshall Islands leaders for days.
Concerns were raised over the amount of SOV which would be allocated to SOV’s creators Neema. These were combatted with the prospect of a cash injection into the Marshall Islands via investment in the new currency.
Marshall Islands President Hilda Heine says:
This is a historic moment for our people, finally issuing and using our own currency, alongside the USD…It is another step of manifesting our national liberty.”
As part of the plans, 2.4 million SOV will be issued to the Marshallese people. The launch could raise $30 million, around half of this value would go to the startup Neema.
Implications for the Marshall Islands
The International Monetary Fund (IMF) has criticized the plans with a number of concerns including the risk of money laundering and that the Marshall Islands could lose its only corresponding banking relationship (CBR) with the US. The IMF says:
In the absence of adequate risk mitigating measures, the issuance of a decentralized digital currency as a second legal tender would not only increase macroeconomic and financial integrity risks but elevate the risk of losing the last U.S. dollar CBR.
Though the IMF seems unable to prevent the issuance of the SOV the Marshall Islands could see objection lead to the retraction of some of the international aid it relies on.
The US contributes around $70 million annually in assistance. And, the US Treasury Department has raised its concerns including the illicit implications of anonymity. That said, the SOV will require users to register their identities, so the coin will not follow the pseudo-anonymous nature of bitcoin.
SOV Project Led by Israeli Startup Neema
Neema’s co-owner Barak Ben Ezer says he made a list of countries potentially open to a cryptocurrency as legal tender. The entrepreneur told TheMarker he excluded countries like Sweden, looking for smaller countries which vote alongside Israel in the United Nations: