Marshall Islands Sets Up Non-Profit to Oversee National Digital Currency
The US used to test hydrogen bombs on the islands, and still owes the country over $500 million in reparations. Foreign aid from the US is due to be cut in half — from $60 million to $30 million — when the financial provisions of the Compact of Free Association between the US and the Marshall Islands expire in 2023. “And they are spending lots of money, both ways, to children who are studying abroad and to the people who are working,” Dr. Dittus told Decrypt. The Marshall Islands is just one of many small nations that are independent in name, but still burdened by the incredible weight of the larger, more dominant nations that once controlled them through conquest. 20% of the money raised from the launch of SOV will go to the fund that handles the victims of these nuclear tests.
When a transaction is made, the node creating the transaction broadcasts details of the transaction using encryption to other nodes throughout the node network so that the transaction (and every other transaction) is known. In 1983, American cryptographer David Chaum conceived of a type of cryptographic electronic money called ecash.1011 Later, in 1995, he implemented it through Digicash,12 an early form of cryptographic electronic payments. Digicash required user software in order to withdraw notes from a bank and designate specific encrypted keys before they could be sent to a recipient. The Marshall Islands says the SOV will require users to identify themselves, thus avoiding the anonymity that has kept bitcoin and other cryptocurrencies from gaining support from governments. The government of the Marshall Islands will oversee the new digital currency and leverage the combination of Algorand’s blockchain functionality and SFB Technologies’ identity-management and compliance platform. Our money supply will grow at a sustainable 4% each year, following Milton Friedman’s k% rule.
According to FINMA’s150 requirements, VASPs need to verify the identity of the beneficiary of the transfer. These physical representations of cryptocurrency do not hold any value by themselves; these are only utilized for collectable purposes. Intriguingly, the release also added that, after the SOV is launched, the aim is “to transition to an alternative governance model based on blockchain. Specific technological solutions are still being investigated.” Bank of England Governor Mark Carney said this past week that a global speculative mania SOV had encouraged a proliferation of the currencies, and that they needed to be held to the same standards as the rest of the financial system.
Implication for Other Small Nations
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“SOV is about getting rid of the excuses” for not shifting to digital assets, he said in a statement. He said it solved a huge problem with cryptocurrencies, which haven’t previously been recognized as “real” money by banks, regulators and the U.S. Second, without a central bank, the Marshall Islands are still dependent on the economy of the USA, the superpower to whom the island nation is attached. However, because central banks would not or could not underwrite these loans, they privatized the process to commercial banks as subcontractors. The central bank only issues loans to these commercial banks and to the government. This process ensures that new money (loans) goes to those who can repay it (or to the bankers’ “friends” if the system is corrupt).
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The regulatory clarity is anticipated to come primarily from Congress rather than the SEC. The introduction of SOV and UBI will create a new tool which is currently absent from global financing. Bringing the latest advantages of blockchain technology and a decentralized monetary policy from the periphery of tech-savvy people and sometimes borderline legitimate uses, into the heart of international finance — a sovereign legal tender. The synergy of this hybridization will be utilizing both instruments’ advantages to function as a low cost, fast-operating means of payment in the RMI and around the globe. Growing value and easy to use wallet storage can make this currency a preferred store of value, especially but not limited for the unbanked. Hopefully, more users would yield more usage, higher value and on the fly reduce global inequality.
The completion of the board marks the final phase before the launch of the public auction in the form of a Sovereign Subscription Rights (SSR) offering, which will be offered on the Algorand blockchain later this year. The tokenized SSR offering also marks a major first for a sovereign nation, enabling participants to secure rights to the first cryptocurrency issued by a sovereign nation as legal tender. First, introducing the SOV would imply that the RMI would move to a dual currency system. In the absence of a monetary policy framework and a central bank this would impose significant risks to macroeconomic, monetary, and financial stability. The fixed annual growth rate of 4 percent irrespective of the demand for the currency would lead to large fluctuations in the value of the SOV against other currencies, including the U.S. dollar, the primary legal tender. These fluctuations, in turn, could create incentives for households, firms, and visitors to hoard the more stable/appreciating legal tender, while discharging debts and other obligations, including tax obligations, in the depreciating legal tender.
SFB technologies was planning on organizing a pre-sale of rights to future SOV units, with an eye to “test the markets and technology” and to gather additional information that could inform the government’s decision whether to proceed with the launch of the SOV. The pre-sale as currently conceived is independent of the RMI government and is designed as a private sale. Additional motivations expand financial inclusion and improve RMI’s access to the global digital financial system. Parliament has considered setting up a Digital Economic Zone, to give crypto entrepreneurs a regulatory haven and, hopefully, dribble a few pennies toward the Republic. This zone would be set up on Rongelap Atoll, a former nuclear testing site strewn with radioactive fallout — just the place to put crypto entrepreneurs. Cross-border finance is inefficient, needlessly complicated, and prohibitively expensive.
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Do not act on any opinion expressed here without consulting a qualified professional. It looked very like the Marshall Islands government was lured in by the prospect of a magical free Internet money get-rich-quick scheme — courtesy blockchain promoters who knew a desperate mark when they saw one. The Fed’s profligate money printing is “hard to reconcile with the functioning financial system of any market-based system,” said Dr. Dittus.
- Called the SOV Development Fund, the entity will develop, implement and maintain the infrastructure for the SOV, including the digital currency’s management and upgrade, according to a press release published Tuesday.
- I ruled out countries like Sweden and went to the smallest countries in the world.
- Some miners pool resources, sharing their processing power over a network to split the reward equally, according to the amount of work they contributed to the probability of finding a block.
On March 21st, a huge milestone was achieved in the fight to legitimize Cryptocurrencies and Blockchain technology.
Worst of all, billions of people are unable to access even basic financial services due to cost or lack of access. Post 9/11, money laundering and financing of terrorism are major threats that the global community is fighting together. But without our own currency, and beholden to existing systems, it is hard for us to contribute much to this fight beyond basic compliance. With a digital currency based on blockchain, we can automate much of the compliance burden and take a proactive role on the international stage.
When El Salvador adopted Bitcoin as legal tender in 2021, it captured a lot of global attention. Although the government opened the door for citizens to freely use Bitcoin, only 7.5% currently utilize it as part of their regular financial habits. Compared with higher adoption rates in other countries—where it was a grassroots initiative rather than a top-down government mandate—this suggests that mainstream Bitcoin adoption requires broader economic and social readiness to succeed. I’ve been following El Salvador’s experiment since day one because it presented a unique opportunity to observe how national policies influence cryptocurrency adoption, something I’ve been closely tracking as the founder of Outset PR.