The International Monetary Fund has “cautioned” the Republic of Marshall Islands against adopting a cryptocurrency as one of its legal tenders. The Washington-based global lender cites evidence of what central bankers will do to frustrate cryptocurrency adoption, saying the consequences of the Marshall Islands’ could extend far and wide.
Subtle “no” to Cryptocurrencies?
In the September 10, 2018 press release, the United Nations-backed agency tells the Republic of the Marshall Islands that introducing digital currencies as an official legal tender will cause the loss of financial integrity besides the island’s relationship with international banks.
The 58-page report specifically mentions that U.S banks will not work with Marshall Islands-based businesses in the event digital currencies become official currency. Should that happen, the 53,000 island residents will become landlocked as far as banking services are concerned. The proposed cryptocurrency would be launched through a planned $30 million Initial Coin Offering (ICO) besides an airdrop targeting residents. In what looks like an unfair threat, the IMF cautions:
“The potential benefits from [digital currency] revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks. In the absence of adequate measures to mitigate them, the authorities should seriously reconsider the issuance of the digital currency as legal tender.”
Crypto Sun Setting for Marshall Islands?
The Marshall Islands’s government announced in March it was planning to launch the Sovereign (SOV), an official cryptocurrency and second legal tender. The SOV would have a built-in facial recognition feature to defeat money laundering and would be distributed to the island’s residents.
The local parliament legislated the issuing plan that included arrangements for an Initial Coin Offering and plans to allow exchanges to trade in the currency. The Minister-in-Assistance to the president David Paul had revealed then the plans “was specifically targeted for the long-term needs of the country,” and could bolster the local budget.
The warning by the IMF over the self-governing territory’s plan to launch the sovereign sounds like the usual doomsday warnings the cryptocurrency users are used to receiving.
The notion that there is “the potential for digital currencies to be misused for money laundering and terrorist financing,” it can now be said doesn’t sell anymore after a research showed that terrorists prefer cash to digital currencies any day.
Fear of the unknown in the wake of increased interest in cryptocurrencies could be an issue as a report published by the IMF in June had the agency’s deputy director sound the alarm that “Crypto assets may one day reduce demand for central bank money.”