The Government of the Marshall Islands is becoming a world reference in the adoption of cryptocurrency thanks to the official promulgation of the Declaration And Issuance Of The Sovereign Currency Act. A legal tender cryptocurrency that could change the current situation regarding the valuation of cryptocurrencies.
According to information revealed by Ran Neuner, Host of Crypto Trader, a show broadcasted by CNBC Africa, the document was signed on March 1, 2018, as a final step in a series of efforts made by the country to migrate to cryptos, mitigating its dependence on the American Dollar.
Although the island gained its independence during the 1980’s, the American dollar has remained the legal tender adopted nationally.
The Government of the Marshall Islands has been emphatic in pointing out that in order not to traumatize the adaptation process, as well as for macroeconomic reasons, the dollar will remain in circulation in parallel with the country’s official currency.
After the news broke, several analysts and enthusiasts began the debate about the legal implications that such a decision could bring. The most important consequences might be:
- The Sovereign would be the first crypto-money that could be considered legal tender around the world.
- The possibility of using a crypto/fiat pairs in the Forex market would open up.
- Traditional banks and financial services such as Visa would be legally obliged to accept it because of its official status.
- Some consider that due to its characteristics, what the document indicates as ICO is, in fact, an IMO (Initial Monetary Offering) because it is a country that is opening up to the world the existence of official currency.
Another important characteristic is that unlike other initiatives such as the Venezuelan Petro which is defined as a crypto asset, the Sovereign would be the only official national currency. It is also important to note that once issued, the Central Bank will not control it but instead will be completely decentralized.
“It’s important to emphasize that this cryptocurrency, the Sovereign, is completely decentralized and the government cannot control the money supply. After the[crowd sale], they don’t have any control over the currency, it circulates, and the money supply is predetermined on the blockchain,” explained Barak Ben-Ezer, CEO of Neema, an Israeli fintech company responsible for the technical aspects of the Sovereign according to information provided by The Next Web
To avoid money laundering or capital flight issues, the crypto will have some measures that will differentiate it from the rest.
According to David Paul, Minister in assistance to the President of the Marshall Islands, the Sovereign will make illegal operations more difficult by avoiding anonymity when making transactions:
“While there is understandable concern by policymakers 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 … Law enforcement will be able to request, with appropriate authorization, access to the source of funds that a person has received. This information will be recorded in the blockchain, and is unalterable”
Barak Ben-Ezer also explained the technical details that will make it possible to guarantee the legal use of the official crypto:
“They issue to you an identity token, so each SOV wallet is associated with an identity token. You cannot send money out of an SOV wallet unless you have this identity token, in this manner, the funds within SOV always move between identified and verified wallets … So now the SEC cannot really say it is a security and the CFTC cannot say it is a commodity and the IRS cannot say it is property”.
Finally, it remains to be seen whether this decision will serve as an incentive to other countries considering the idea of migrating to a currency system. Russia, Iran, Venezuela, Norway and others have already expressed interest in issuing official cryptocurrencies.
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