Marshall Islands to launch official cryptocurrency

| March 6, 2018

The Republic of the Marshall Islands, an Pacific island nation with a population of about 50,000, is poised to become the first sovereign nation to issue an official cryptocurrency.

The new currency will be known as “Sovereign” or “SOV.” The new currency will be distributed to the public via an Initial Currency Offering and circulate as legal tender in the country, alongside its current local currency, the U.S. dollar.

“This is a historic moment for our people, finally issuing and using our own currency, alongside the USD,” said RMI President Hilda C. Heine.

“It is another step of manifesting our national liberty. Allocating SOV units directly to the citizens will circulate the currency and distribute wealth efficiently to our people. In addition, The RMI will invest the revenues to support its climate change efforts, green energy, healthcare for those still affected by the U.S. nuclear tests and education.”

“The Marshall Islands is the first nation to adopt a transparent crypto monetary system, and we are proud of it,” added David Paul, Minister-in-Assistance to the President and Environment Minister of the RMI.

“We are excited to be the world’s first nation to leapfrog into the era of digital currencies. 10 percent of our proceeds from the ICO will be directed toward a Green Climate Fund.” Paul added that he is especially proud of SOV since it is based on the Yokwe blockchain framework that has all the benefits of Bitcoin minus the anonymity.

Y-combinator Israeli fintech startup Neema is partnering with the Marshall Islands to issue the SOV, starting with a presale that will be followed by an ICO later this year.

“SOV is a big deal because, until now, all cryptos were in regulatory limbo,” Barak Ben-Ezer, co-founder of Neema, told Bitcoin Magazine. “None of them was considered ‘real’ money by the IRS or SEC. Accordingly, the IRS taxed them with capital gain tax, and the SEC wants to regulate all ICOs as issuance of securities. The IRS explained in 2014 that it’s not considered real money because it’s not the legal tender of a sovereign nation.”

The solution for Neema was to find a country to partner with to create a cryptocurrency which would become legal tender in a sovereign nation. “SOV has the benefits of cryptocurrency and the legal and regulatory framework that covers sovereign currencies. You can use it without worrying about capital gains and even the ICO may be like selling any currency such as the Euro or Yen.

SOV is based on a permissioned protocol, dubbed “‘Yokwe” (meaning “hello” in the local language), which requires blockchain users to authenticate. According to its advocates, this “solves the anonymity problem that plagued bitcoin and precluded its mainstream adoption.”

The official statement notes that there’s a huge market need for a non-anonymous blockchain system that can operate within a regulated environment. The SOV should become part of a broader E-conomy vision to create a society that uses blockchain technology for a range of purposes, with cryptocurrency and biometric IDs securely recorded on the blockchain.

“SOV is a promising starting point for the adoption of cryptocurrencies by sovereign nations,” said Peter Dittus, former secretary general of the Bank of International Settlements and Neema’s senior economic advisor. “The Yokwe protocol provides a promising balance between transparency and privacy and we’re excited to develop it further. It’s state of the art technology, put to good use, with the right values in mind and a clear purpose.”

Earlier this year, Venezuela’s belagured Socialist government launched a cryptocurrency dubbed Petro, claiming it to be the world’s first sovereign cryptocurrency. However, as the SOV statement notes, the SOV will be legal tender in the Marshall Islands, as defined in a bill passed by the parliament. SOV will be a decentralized cryptocurrency with a price that is uniquely determined by the market, whereas the Petro, initially pegged to the price of oil, can be manipulated at will by the Venezuelan government.

Lawmakers hope the country’s 60,000 residents will use the SOV for everything from paying taxes to buying groceries. Half of the 24 million coins will go to the government and the other half to the Israeli financial technology startup helping with the plans.

Six million SOVs will be made available to international investors, with the money raised used to help pay the budget, invest in anti-global-warming projects, and supporting people still affected by US nuclear testing. Residents will receive 2.4 million SOVs.

David Paul, minister-in-assistance to the president of the Marshall Islands, said the government had not yet determined a launch date for the initial coin offering, but pledge that it would begin soon.

Unlike most popular cryptocurrencies, such as Bitcoin or Ethereum, the SOV will require currency holders to identify themselves, hopefully avoiding the problems of regulating an anonymous currency.

Neema Chief Executive Barak Ben-Ezer said the coins represented a new era for cryptocurrency, with banks and regulators failing to recognize previous currencies.

“SOV is about getting rid of the excuses” for not shifting to digital assets, he said in a statement.

Jehan Chu, the Hong Kong-based co-founder of blockchain platform Kenetic, told the Reuters news agency it was an “amazing move” by the Marshall Islands and that it signaled “the way of the future”.

“Physical currency is going by the wayside as an antiquated, obsolete form of transacting,” he said.  However he warned that the currency was unlikely to hold much appeal for international investors or be particularly valuable outside the Marshall Islands.

Several other governments, including China, Estonia, and Iran, have also discussed plans for their own digital currency.