Why The Marshall Islands is Tokenizing Its Money

The left wing supports UBI as a safety net against the unforeseen circumstances of life; it frees people from the fear of not meeting basic survival needs, improves health and well-being and enables them to better pursue their purpose in life. Libertarians support UBI because it increases individuals’ freedom, reduces individuals’ friction with authorities (e.g., application, means-tests, inspection, tracking, reporting, etc.) and automatically levels the playing field. Furthermore, due to the unconditionality of the benefits, the beneficiaries are spared from screening, monitoring and stigmas involved with existing means-tests. As for the meaningful and transformative economic benefits many had hoped for, El Salvador’s growth has been largely concentrated in the information and communication sector, seemingly driven more by digitization efforts than by Bitcoin itself. Switzerland was one of the first countries to implement the FATF’s Travel Rule. The guidance followed the FATF’s Recommendation 16, however with stricter requirements.

David Paul was tempted by Bitcoin-style “bank the unbanked” rhetoric — the blockchain promoters told Paul how the Marshall Islands might even be able to do without banks entirely if they could use a cryptocurrency instead. For years, the Marshall Islands have been exploring ways to enhance its connectivity to the international financial system. By issuing a currency that is not physically embodied in cash, that can travel the globe instantly, and that is tamper-proof and completely secure, the Marshall Islands will finally be connected to the global financial system on its own terms. The Marshall Islands are working closely with international regulatory bodies to ensure SOV meets all compliance requirements and can be fully integrated into the international financial ecosystem. In fact, SOV is being digitally engineered from the ground up to prevent misuse, unlike paper currencies.

Implication for Other Small Nations

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.

“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).

• Non-fungible tokens (NFTs) are digital assets that represent art, collectibles, gaming, etc.
• Now that the country is scaling back its Bitcoin ambitions to secure a $1.4 billion loan from the International Monetary Fund (IMF), it raises many questions about whether this effort has failed.
• Algorand is a decentralized network created in 2017 by Silvio Micali, a renowned computer scientist and MIT professor.
• Fourth, the identity of SOV users is expected to be verified through licensed international exchanges.
• Our money supply will grow at a sustainable 4% each year, following Milton Friedman’s k% rule.

Sovereign Currency Act of 2018

This monetary policy is centered first and foremost on a deterministic money supply, starting with an initial offering of 24M SOV and then 4 per cent monetary growth each year. Of this 4 per cent growth, 1 per cent is allocated to the validator nodes for covering the blockchain’s operational costs, while the remaining 3 per cent SOV will be distributed directly among all SOV holders equally. With the pro-crypto administration and vision under the new President of the United States, Donald Trump, the U.S. Congress is expected to prioritize cryptocurrency legislation in 2025, with a focus on the Stablecoin Act and the Financial Innovation and Technology for the 21st Century (FIT21) Act.

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.

Now that the country is scaling back its Bitcoin ambitions to secure a $1.4 billion loan from the International Monetary Fund (IMF), it raises many questions about whether this effort has failed. Cryptocurrency networks display a lack of regulation that has been criticized as enabling criminals who seek to evade taxes and launder money. Money laundering issues are also present in regular bank transfers, however with bank-to-bank wire transfers for instance, the account holder must at least provide a proven identity. Venezuela last month became the first country to launch its own cryptocurrency when it launched the virtual Petro, backed by crude oil reserves. The Marshall Islands said the SOV will be different because it will be recognized in law as legal tender, effectively backed by the government.

The Marshall Islands’ final judgment may be influenced by the International Monetary Fund (IMF), which has objected to the coin since 2018 on the grounds that it may cause “economic, reputational, and governance risks.” In May, it said that those concerns still stood. The Pacific Island nation, home to about 60,000, is considering issuing it to end its decades-long reliance on the US dollar. It’s no surprise that a team of forward-thinking tech entrepreneurs would want to accomplish a feat like this. However one has to wonder why the Marshall Islands chose to go along with this plan, especially knowing how volatile the crypto market is, and how Blockchain technology is still in its early stages and struggling with scalability issues. The Marshall Islands, a tiny nation in the middle of the Pacific Ocean, approved a bill to develop its own cryptocurrency called Sovereign (SOV) in partnership with Israeli Tech Company Neema.