Marshall Islands minister David Paul has explained why the small Pacific country is switching to cryptocurrency.
The Marshall Islands currency is pegged to the US dollar, which Paul argues causes financial and economic problems for the country and people living there.
The Minister-In-Assistance to the President and environment explained blockchain technology offers advantages to the economies of small nations.
“The Marshall Islands has only fragile links to the wider world of international finance, and compliance is extremely resource intensive,” says Paul.
“Many of our citizens send or receive money using remittance services, paying fees of up to 10% per transaction. Even simple things like acquiring and installing ATMs become complicated when you’re in the middle of the Pacific Ocean!
No need for a central bank
“But blockchain transactions are fast, simple, and cheap. Blockchain transactions are secure, because they’re replicated throughout a decentralized network. Most importantly, and despite its mathematical and technical complexity, blockchain is practically very simple.
“The only infrastructure needed for a blockchain-based digital currency is the network itself. We do not need to create a central bank and manage the printing and processing of paper money.”
The Marshall Islands signalled an intent to become the first nation to issue a sovereign cryptocurrency with a Sovereign Currency Act in 2018.
The new fixed supply coin will be called the SOV.
“We chose to create a fixed money supply with fixed growth because fiat currencies can be remarkably unstable. The policies of major central banks are not reassuring, as the gold and bitcoin prices attest. We as governments need to take a more sustainable approach to money, and not treat it as a limitless resource,” says Paul.
Blockchain means independence
He also explained that although the SOV will be a decentralised currency, the country won’t find that a problem.
“It may seem surprising that the Republic of the Marshall Islands would be issuing a currency based on blockchain technology, but it’s just the opposite: the Marshallese people have lived with decentralized systems for hundreds of years,” he says.
“For us, a country of just over 50,000 people spread across more than 1,000 Pacific islands, centralized solutions aren’t just inefficient: they’re completely unworkable. Blockchain has given us the opportunity to finally acquire monetary independence in a way that reflects Marshallese values. We intend to grasp that opportunity, innovatively and responsibly.”
Paul is expected to announce further developments relating to the SOV at the Invest: Asia 2019 cryptocurrency conference in Singapore starting on September 11.