Cryptocurrency Is Now An Official Currency In The Marshall Islands

Small Pacific island nation becomes first in the world to officially embrace cryptocurrency; Venezuela and Cambodia may be next.

Visual of the digital Cryptocurrency, Bitcoin
Dan Kitwood / Getty Images

Small Pacific island nation becomes first in the world to officially embrace cryptocurrency; Venezuela and Cambodia may be next.

The Marshall Islands were formed in 1982, and they’ve been operating with U.S. currency ever since. In a move that is virtually certain to embolden proponents of digital currency worldwide, the Marshall Islands have now taken the unprecedented action of selecting cryptocurrency as their second federally recognized form of legal tender. In other words, the tiny nation’s government will provide backing for what they’ve dubbed “Sovereign.”

How Much Power Will Sovereign Cryptocurrency Have?

Also known as SOV, this soon to be released cryptocurrency will join the U.S. dollar on even ground because they will both have the same legal payment status. This will help move the Marshall Islands into a more technologically advanced age. It’s also intended to boost the economy and raise some much-needed money for the cash-strapped government. Currently, much of the country’s funding comes via an annual stipend of $70 million from the U.S. government. In exchange, the U.S. operates a military base from the Kwajalein Atoll.

Moving Toward Independence?

According to The Telegraph, the nation’s president, Hilda Heine, released a statement in which she called this move “a historic moment.” She elaborated that issuing their own currency “is another step of manifesting our national liberty.” The Marshall Islands and the U.S. are very closely connected due to a Compact of Free Association, which is why the nation uses U.S. currency. It’s unclear if launching a new national currency is a step toward moving away from the current arrangement.

Gathering Funding To Launch SOV

Some people may be suspect of cryptocurrency, but industry experts have pointed out that its global value has exceeded $336 billion. An analysis from Coinlist indicates that Bitcoin alone has accrued enough value and power to make it comparable to many nations. In fact, if Bitcoin actually was a country, its GDP would earn it a spot on the top 60 wealthiest nations list.

Launching a new cryptocurrency requires a lot of cash. To that end, the Marshall Islands government has joined forces with Israeli startup Neema. When SOV officially launches, there will be 24 million of these crypto coins issued. Half will go to Neema, with the Marshall Islands retaining control over the other half. Next, the nation plans to approach international investors with the opportunity to purchase 6 million SOVs.

Time.com’s Money reported that the proceeds from selling half the country’s initial offering of SOVs will be used for several programs. The top three priorities are combating the damage caused by global climate change, paying for the nation’s budget, and offering additional assistance to the victims of U.S. nuclear tests.

Image of Laura Beach in Marshall Islands
One use of the proceeds will help the Marshall Islands combat climate change damage. Stefan Lins / Flickr (CC BY 2.0)

Which Country Will be Next?

The Marshall Islands might be the first to create a federally backed form of cryptocurrency, but Venezuela got the ball rolling by announcing plans for their own digital currency. The difference, though, is that Venezuela hasn’t made their cryptocurrency into legal tender, which means it is isn’t backed or protected by the government.

Per The Telegraph, Cambodia has taken inspiration from Venezuela’s plans and maybe the next nation to do something similar. With the Marshall Islands taking things in a much bolder direction, it’s possible that the leaders of Venezuela and Cambodia will push to expand their respective country’s support for their homegrown forms of cryptocurrency.

The Marshall Islands Controversy

Residents of the Marshall Islands will receive 2.4 million SOVs, and the government envisions them being used to pay for everyday things across the island. This monumental move by the Marshall Islands may become very influential globally, but it’s still not without local controversy.

Some residents have expressed concerns about giving so much national digital currency to an Israeli startup. Others quite simply aren’t convinced that cryptocurrency is anything more than just a fad. Either way, the Marshall Islands is about to become a test case for every other country that’s interested in launching a national cryptocurrency.