The Marshall Islands’ plan to launch a sovereign cryptocurrency – somewhat unimaginatively called the “SOV”– is back on track, according to a recent blog post published by the project’s developers.
President Hilda Heine’s original state crypto plans, issued through the February 2018 Sovereign Currency Act, set out to incorporate the SOV as the Republic of the Marshall Islands’ second legal tender. The plan is an ambitious one for such a small and remote Micronesian nation. The Marshall Islands has a population of just over 50,000, and is spread out across 29 coral atolls that are made up of more than 1,000 islands and islets. When the crypto project was first announced in November, unsurprisingly, it prompted a parliamentary vote of no confidence to be tabled against Heine.
The President, who is the only female leader in the Pacific Islands, survived the motion by just one vote and afterwards complained that “Chinese interests” were trying to force her from office.
Opposition politicians, on the other hand, said her plans to turn the Marshalls into a crypto-led fintech hub risked harming the country’s image and would turn the nation into a center for money laundering and terrorist financing.
The International Monetary Fund joined the criticism by saying the introduction of the SOV cryptocurrency put the country in “uncharted waters” and raised the risk of losing what mainstream banking relationships the tiny collection of Pacific islands has. The IMF also scathingly said the tech team behind the crypto launch had “limited financial sector experience.”.
Seemingly undeterred, the SOV development team published its recent blog to announce that the currency will launch around the middle of this year. It went on to say that in the last few months the team has been busy combining “technological innovation and national and international law, economics, and politics.” It says it has made “significant progress in finding partners, investors and developers”.
The blog is quick to point out new, supposedly heavyweight, economic and tech additions to its team that includes Peter Dittus, a Chief Economist and a former Secretary General of the Bank for International Settlements, who the SOV team describe as “a critical voice on the current global financial system.”
The SOV team says another addition is Steve Tendon, “the architect behind Malta’s transformation into a Blockchain Island”. The blog goes on to describe how the project will “develop the Marshall Islands into a global financial center for crypto” that will emulate the Cayman Islands”.
The blog post describes the Caymans as “a territory which now incorporates 75% of the world’s hedge funds despite having a similar population to the Marshall Islands.” The SOV team adds that “in just a few decades, GDP in the Caymans has grown to $3.2 billion, with enormous benefits for all citizens.”
What happens next will be interesting, if not painful, for the beleaguered Marshall islands.
An in-depth December 2018 Bloomberg article described the Marshall Islands as “facing rising seas and financial isolation” and as a place that “desperately needs a get-rich-quick scheme.”
The Bloomberg piece points outs that while “cryptocurrencies rely on a web-connected economy”, in the Marshall Islands, “power outages are frequent… the ATMs run out of cash all the time” and most people use “only the basic functions of cell phones”.
Other countries’ attempts to create a sovereign currency have been met with a mix of curiosity and contempt. In Venezuela, the controversial state-owned cryptocurrency “Petro” is widely derided by the global community, seen as nothing more than a murky and failing effort to prop up a dying economy.
Meanwhile Iran’s efforts to launch a state cryptocurrency are obvious attempts to evade what Tehran says are unfair US sanctions, and North Korea has looked at state-backed cryptocurrencies for similar reasons.
The recent SOV development blog post, however, is understandably keen to play up the mainstream acceptance of such sovereign digital currencies. “As the IMF and other observers have noted, cryptocurrencies issued by sovereign countries will play a major role in the future of crypto markets,” says the blog.
That may well turn out to be true. But whether it can happen in the Marshall Islands is another question entirely.