- Marshall Islands planned to replace US dollar with their own state crypto (SOV).
- IMF criticized their plans saying the island would become isolated.
- Government minister David Paul says they will take a methodical approach to put in place AML measures.
The Republic of Marshall Islands (RMI) is still optimistic about its plan to replace the US dollar with the world’s first digital legal tender, the Sovereign (SOV). This is despite a warning issued earlier by the International Monetary Fund (IMF) against going on with the plans.
Marshall Islands Take a Stand for Crypto
Marshall Islands’ minster Minister-in-Assistance to the President & Environment David Paul has disagreed with the position taken by the IMF and maintained that the Island country was still optimistic their plans would succeed.
David Paul now disagrees with the IMF’s position arguing that the SOV will function with no correspondent bank and therefore reduce the country’s need to depend on external aid.
Paul believes the issuance of the world’s first digital legal tender will ensure that republic and its residents get assimilated into the trending digital economy, allowing them to send and receive funds safely and instantaneously without the need of correspondent banks. The minister blamed correspondent banks stating:
“The banks 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.”
In February, government officials from the Pacific republic confirmed they would issue their own digital currency that would circulate as a legal tender along with an Initial Coin Offering slated for February 2019. The country’s parliament approved the plans and signed the bill into law on March 1, 2018. Minister David Paul had said then:
“As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form.”
Fair Warning by the IMF
However, the International Monetary Fund cautioned against the plans to make a cryptocurrency legal tender citing potential risks to its economy over fears of the island’s high dependence on international aid and possibilities of getting isolated from mainstream financial institutions.
The international agency’s report stated that the Marshall Islands’ remaining commercial bank could lose its “last U.S. dollar correspondent banking relationship (CBR) with a U.S.-based bank” besides tightening compliance rules in the US. The IMF reported:
“In the absence of adequate risk mitigating measures, the issuance of a decentralized digital currency as a second legal tender would not only increase macroeconomic and financial integrity risks but elevate the risk of losing the last U.S. dollar CBR.”
The minister has said the island will take a “methodical and measured approach” to put in place AML mechanisms which are already embedded into the digital currency adding that they look forward to engaging further with IMF and other stakeholders.