Marshall Islands Goes Ahead with State-Backed Crypto Plans Despite IMF Warning

The Pacific country of the Marshall Islands will be proceeding with its previously reported plan of launching its own virtual currency, without the blessing of the International Monetary Fund.

February this year saw the Republic of the Marshall Islands (RMI) pass a law to allow for the development of the Sovereign (SOV), a state-backed virtual currency that will be used as legal tender along with the U.S. dollar. Plans for this innovative initiative seem to be full steam ahead even without the support of the International Monetary Fund (IMF).

The Marshall Islands is Keen on (State-backed) Crypto

A report by the IMF previously stated that authorities in the Pacific country “should seriously reconsider the issuance of the digital currency as legal tender.” However, according to The Fiji Times, the Marshall Islands government is not deterred. The Minister-in-Assistance to President Hilda Heine, David Paul, said:

Issuing the world’s first legal digital tender, the SOV, will keep the Republic of the Marshall Islands and its residents integrated into the digital economy, allow residents to transfer and receive funds safely and instantaneously without the need for correspondent banks, [which] have long threatened to stop servicing small Pacific island countries like the RMI, and help the country make up for a sharp and imminent decline in external aid.

IMF Concerns

This dependence on financial aid is one of the items mentioned in the IMF report. The Marshall Islands consist of hundreds of islands which are susceptible to natural disasters. This leads the RMI to rely on foreign aid. The IMF feels that international banks may be wary of dealing with a country that deals in crypto.

A lot of financial institutions view virtual currencies as a breeding ground for illicit activities including terror financing, money laundering, and fraud. The IMF added that the country’s U.S. correspondent bank “will be quite worried” if the SOV is introduced.

However, Paul, who is also the Environment Minister, discussed how this could be a positive change for the RMI:

We are taking a methodical and measured approached to ensure that anti-money laundering mechanisms are embedded into the currency itself – a first for any currency. We look forward to further engaging with the IMF and other international stakeholders and introducing them to these protocols in the coming months.

An ICO for the SOV is planned for late next year.

The country definitely seems to be making technological advancements this year. Radio New Zealand Pacific recently reported that RMI has an ambitious plan to become carbon neutral by the year 2050.

Do you think that the RMI’s Sovereign currency will be a success? Let us know in the comments below!

Images courtesy of Pixabay and Shutterstock.