The Marshall Islands replaces the US dollar with its own cryptocurrency

Image: Stefan Lins / Flickr

The Marshall Islands made its own cryptocurrency, doing away with the US dollar. The government has signed the change into law, making the “sovereign” its new official cryptocurrency, as spotted by CNBC Africa cryptocurrency trader host Ran Neuner on Twitter yesterday.

The bill was signed into effect on March 1st, but the news is making waves again this week. The Marshall Islands’ population is 53,066, so the change doesn’t affect many, but it is significant for citizens of the islands because banks and credit card companies will need to begin accepting it. With the recent change, US dollars are still likely to be accepted on the Marshall Islands — the sovereign will just be considered the nation’s official legal tender.

In February, top officials from the Marshall Islands confirmed that the Pacific republic would issue its own cryptocurrency to be circulated as legal tender. The digital coin also received approval from the country’s parliament. “As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form,” said David Paul, minister-in-assistance to the president of the Marshall Islands, to Reuters at the time.

The sovereign will be launched through an initial coin offering and supply is supposed to be capped at 24 million tokens, as a precaution against inflation. Paul said in February that a token presale for investors would launch soon, but there’s been no further word on that yet.

The Marshall Islands is a United Nations member and a sovereign state, creating a larger impact for banks globally. Back in February, Venezuela launched its own oil-backed cryptocurrency called the petro, but it hasn’t completely removed the fiat bolivar from circulation. Venezuela is also under US sanctions, and President Donald Trump actually issued an executive order banning anyone in the US or US territories from investing in petro.

Comments

This is a question for all cryptocurrencies, but i think it’s more important here since this is the new official tender:

Capping the supply is supposed to prevent inflation, but some small amount of inflation helps economies grow, right? Won’t capping the currency just cause deflation instead, which is much worse?

I believe the ICO is being capped. They will need to eventually release more.

What i understand from economics is, the finite supply can make everyone sit on their own money (with the expectation that the money will become more valuable) instead of investing it in productive uses. So this is how you get deflation. The unwillingness of the US Central Bank to create more money was also part of the reason for late 20s great depression (everyone held on to their money).

But the article does not say to what degree this crypto will be decentralized. It can also be like ripple where central nodes increase the supply as they wish.

it sounds to me like they’re planning on distributing it out: a percent to the government, a percent to the people, and so on.

But it also looks like it’s getting a hard cap of 24 million, and I’d assume it’s centrally orchestrated for that reason.

You got that a bit off. Finite supply doesn’t have much to do with that – technically all currencies have a finite supply – it’s not as easy to create money as it seems (outside of countries that print willy nilly, and they get hyperinflation for those efforts), it’s when there is insufficient demand (for goods / services, which in turn drives investment etc).
In and of itself switching currencies should have no effect, except in this case they are going to stress access to capital, because despite what is stated, international banks do not have to accept anything, they can choose to stop doing business there. And there are plenty of non-bank capital sources for whom the hassle may not be worth it.

digital money can be divided into very small fractions, so i dont think the total amount of coins is an issue

the number of coins itself isn’t the issue, it’s that it’s capped.

That you bring up fractional coins at all implies to me that you expect cryptocurrencies to increase buying power year over year. So this year, I have to spend 1 Coin (whatever currency) to buy an ice cream cone, and next year I’d have to spend 0.9 Coins to buy an ice cream cone.

that’s exactly what deflation is.

IMAO it’s a pretty dumb idea to do this experiment on your own citizens.

Cryptocurrency is still the dumbest idea we’ve had in a while.

Is it, though?

Probably not.

not as dumb as nuclear power

Wrong.

Do you even know anything about how it works? It’s one of the most innovative inventions of the century.

Yeah ok.

Have you actually studied it? It’s honestly very surprising to me that someone could say it’s not one of the most innovative inventions.

The technology behind it is impressive. The idea of replacing a central currency is horrendously misguided. Some of the consequences of technology (e.g. the fact that its tough to create additional money as time passes, when that can be legitimately needed) are also bad limitations for functional money.

The clueless chiming in.

Interesting experiment. Will these coins be traded on sites like Binance, I wonder? I think I can see where they are hoping to go with this…imagine if their coin blew up leading the country to become very wealthy..since it is a legal tender coin, i could see people buying a lot of this with profits from the other cryptos.

yikes that’s a whole different scary idea: if it’s a capped amount (and this seems to indicate it is) then outside investors speculators could buy up large portions of the currency to sit on it.

I applaud the move but I’m not sure how is this going to work. Anyone care for some toughful comments?
Every citizen and visitor will have to have access to tech (at least a smartphone) to buy anything?
Visitors will be exchanging the money on an app before they land?

Sounds like they will still accept US dollars at least, so you shouldn’t have to use the crypto.

So what are they accepting for their ICO?

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