Marshall Islands warned against adopting digital currency

[Hydrogen]

The Republic of the Marshall Islands has been warned against adopting a digital currency as a second form of legal tender.

The International Monetary Fund (IMF) said the country, which consists of hundreds of islands in the Pacific Ocean, should "seriously reconsider".

Currently, only the US dollar counts as legal tender in the islands.

A law to adopt a digital currency named "Sovereign" alongside the dollar was passed in February.

The first virtual coins are due to be issued to members of the public via an initial coin offering (ICO) later this year.

However, IMF directors said the potential benefits of the move were much smaller than the potential costs of "economic, reputational and governance risks".

"[Marshall Island] authorities should seriously reconsider the issuance of the digital currency as legal tender," wrote the directors in their report, which was first spotted by cryptocurrency news site Coindesk.

There is just one domestic commercial bank in the country and it is at risk of losing its only correspondent banking relationship with another bank in the US.

That relationship allows the Islands to transfer dollars in and out of the country.

It highlighted the Marshall Islands' dependence on foreign aid, and the fact that the country is vulnerable to natural disasters as well as sea level rise linked to climate change.

Adopting a digital currency as an official form of legal tender would threaten both financial integrity and the nation's key relationship with the US bank. The result could be disruption to foreign aid, according to the IMF.

The global financial organisation was expressing concern because it was aware of traditional banks' wariness around digital currencies, said David Gerard, author of Attack of the 50 foot Blockchain.

Those banks may, for example, associate crypto or digital currencies with criminal activity, including money-laundering, because the digital currency networks have been designed to move coins or tokens around at great speed.

"You just can't control the stuff," Mr Gerard told the BBC. "Tokens are really, really liquid, that's the whole point."

This could give the US correspondent bank cause to rethink its relationship with the Marshall Islands, he explained.

"The IMF is not strong-arming the Marshalls, what they're doing is describing what will obviously happen if they proceed - the large correspondent bank will be quite worried," he added.

https://www.bbc.com/news/technology-45485685

....

Short article for once.  

Details aren't 100% provided here. It appears the Marshall Islands are planning to adopt their own crypto currency named "Sovereign". As mentioned there aren't many details but it is plausible their economic situation is similar to that of samoa. They appear to have a single bank in their region and that sometimes means citizens have issues obtaining loans and engaging in other basic financial transactions which many take for granted.

It is possible they could see economic benefits in embracing crypto as it caters more towards those with poorer credit ratings and demographics who might typically have trouble finding support from banks for things like business, home or car loans.

Ceasing foreign aid to the Islands has also been mentioned as a potential repurcussion if the Islands choose not to follow the IMF's recommendations, here. And so we see perhaps a far cry from what happens when venezuela attempts to create its own crypto currency.

There could be interesting angles, present. I wonder what peoples thoughts on this are?

[dothebeats]

This clearly states the intentions of the US banks involved in Marshall Islands' foreign bank relations: they want the utmost control to the country's financial relations and make sure that the country doesn't deviate from what their standards are. Perhaps I might be overthinking the said move, and a country losing a tight financial relationship to a foreign bank is somewhat hard but to think that they'd be cutting ties after the country decided to adopt cryptocurrency makes their motive questionable.

However this pans out and whichever way this goes, it's good that the officials in Marshall Islands are looking for different ways to potentially boost their economy and alleviate their dependency on others. It's a good move, I'd say.

[stompix]

It is possible they could see economic benefits in embracing crypto as it caters more towards those with poorer credit ratings and demographics who might typically have trouble finding support from banks for things like business, home or car loans.

Ceasing foreign aid to the Islands has also been mentioned as a potential repurcussion if the Islands choose not to follow the IMF's recommendations, here. And so we see perhaps a far cry from what happens when venezuela attempts to create its own crypto currency.

There could be interesting angles, present. I wonder what peoples thoughts on this are?

How will a crypto cater to those with bad credit ratings?
Actually...how do you even get credits with a crypto without somebody lending you money?

Seriously, we're on a forum where asking for a loan with collateral equals red trust and you talk about bad credit history?

However this pans out and whichever way this goes, it's good that the officials in Marshall Islands are looking for different ways to potentially boost their economy and alleviate their dependency on others. It's a good move, I'd say.

So just because the FMI is against this move, cryptos created and controlled by the state are now a good thing?

They are just trying to milk the ICO madness
https://en.globes.co.il/en/article-israeli-startup-to-lead-marshall-islands-cryptocurrency-ico-1001225819

[Ucy]

"[Marshall Island] authorities should seriously reconsider the issuance of the digital currency as legal tender,"

I do not understand this very well. Was IMF warning the country against running ICO?
or you mean IMF warned the island against the issuance of Cryptocurrency as legal tender.

But how can IMF warn (with threats) a sovereign country against issuing a digital currency (Cryptocurrency probably?) and running an ICO? Isn't the island an independent nation? Article is disturbing in many ways.


Lest I forget: wonder when IMF will begin to threaten countries with investments rather than useless Aid

[deisik]

Lest I forget: wonder when IMF will begin to threaten countries with investments rather than useless Aid

I don't remember the exact terms (so bear with me) but countries which are members of the IMF agree to refrain from doing certain things in respect to their currencies. For example, they cannot back up their fiat with gold or any other hard asset. If the Islands are also part of the IMF, then the reaction of the Fund shouldn't surprise anyone as they voiced their "concerns" about cryptocurrencies many times before. But that's kind of a given. Christine Lagarde, the boss at the IMF, once said they should eradicate Bitcoin as a “potentially major new vehicle for money laundering and the financing of terrorism”

IMF stands for International Misery Fund (for those who didn't know)

[Hydrogen]

How will a crypto cater to those with bad credit ratings?
Actually...how do you even get credits with a crypto without somebody lending you money?

Seriously, we're on a forum where asking for a loan with collateral equals red trust and you talk about bad credit history?

....

Have you ever wondered how founders of an ICO who are in debt and have bad credit histories can raise millions of dollars of funding in support of their start up venture? The history of ICOs contains many real world examples of those who would be denied business or personal loans from banks, raising large sums to finance their plans.

 

Perhaps one reason so many ICOs fail involves lack of background checks, lack of credit rating and other metrics utilized by banks to gauge how reliable applications for loans are. So you see, unless you're completely unfamiliar with the most basic aspects of ICO--its exceedingly strange that you're even asking this question.

A large part of bitcoin and crypto's success is catering to poorer demographics ignored by banks and financial institutions. There is a segment of the population known as the "unbanked" who are unable to afford the minimum balance of a bank account. Bitcoin and crypto have no such restrictions and so this defines part of both ICO and crypto's success--their willingness to give those who are in debt and have bad credit history opportunities which banks and conventional finance normally would not afford them.

[bobo012]

Good, they are shooting in their leg. In the long term they will regret their decisions against bitcoin and cryptocurrencies.
It is the new standard.

[DgurJIupyf]

How much I realized that these Islands are an offshore zone for cashing in and money laundering. I'm sorry for being direct, but it is...
To raise the economy to a new level. They want to create their own coin. I.e. as I understand the scheme.
bitcoin or altcoin is exchanged through their Bank for a sovereign coin and then withdrawn to their debit card or left on Deposit in the Bank? A clever scheme, that's what I can say...

[aso118]

"[Marshall Island] authorities should seriously reconsider the issuance of the digital currency as legal tender,"

I do not understand this very well. Was IMF warning the country against running ICO?
or you mean IMF warned the island against the issuance of Cryptocurrency as legal tender.

But how can IMF warn (with threats) a sovereign country against issuing a digital currency (Cryptocurrency probably?) and running an ICO? Isn't the island an independent nation? Article is disturbing in many ways.


Lest I forget: wonder when IMF will begin to threaten countries with investments rather than useless Aid

It is just a warning. There is no underlying threat (except the absence of IMF support in case of a crisis). Warnings to sovereign nations are common. Rating agencies warn countries that increasing indebtedness is bad for them and could result in a ratings downgrade. In the end countries might decide to ignore these warnings and go ahead.

[stompix]

~

Have you ever wondered how founders of an ICO who are in debt and have bad credit histories can raise millions of dollars of funding in support of their start up venture? The history of ICOs contains many real world examples of those who would be denied business or personal loans from banks, raising large sums to finance their plans.

 

Perhaps one reason so many ICOs fail involves lack of background checks, lack of credit rating and other metrics utilized by banks to gauge how reliable applications for loans are. So you see, unless you're completely unfamiliar with the most basic aspects of ICO--its exceedingly strange that you're even asking this question.

A large part of bitcoin and crypto's success is catering to poorer demographics ignored by banks and financial institutions. There is a segment of the population known as the "unbanked" who are unable to afford the minimum balance of a bank account. Bitcoin and crypto have no such restrictions and so this defines part of both ICO and crypto's success--their willingness to give those who are in debt and have bad credit history opportunities which banks and conventional finance normally would not afford them.

Wait wait  wait! 

Are we talking about the ones running the ICO or the citizens of the country?

How is an ICO giving an opportunity to somebody who is out of money, in debt and with a bad credit history?
You have said "who are unable to afford the minimum balance of a bank account", what can those invest?
20 cents? And 20 cents in what, this is the main problem!

A sovereign currency..which will use a currency that could be mined by everybody...highly secure /s
A currency issued by a country which without any foreign help will be bankrupt in less than a year
A currency issued by the Islands' government but it is aimed at 90% at foreign investor.....

I see so many red flags I have a deja-vu from the URSS times, no wonder the IMF is also against their plain as is just to sell some coins and hope the money will pour like magic.

[Slow death]

I wonder what peoples thoughts on this are?

They do not have to use this path, they can continue with their currency that by the way is the US dollar and can regulate bitcoin and altcoins that already exist and that the Americans also use without problems. they are totally dependent on the US, both economically and both at the level of security and the IMF is an organization that explores the poor countries and dictates the rules in all the poor countries that depend on them. It would not be too smart to face the IMF because they have a very cruel way of destroying other countries with their austerity measures

[kryptqnick]

Marshall Islands is a very small republic which is extremely dependent on their relationship with the US, especially in the economical area. It is pretty understandable that the adoption of cryptos is not worth the risks. And besides, the article is not about cryptos in general, but rather about the national cryptocurrency project of Sovereign. They wanted to make a national crypto with national ICO. I am more than sure this ICO would fail, because 50k people is the maximum amount of those who would care, and crypto fans are mainly not in favour of the cryptos that are controlled by the gov as much as possible.

[The Sceptical Chymist]

Seriously, we're on a forum where asking for a loan with collateral equals red trust and you talk about bad credit history?
<snip>
They are just trying to milk the ICO madness

Nice to see a skeptic about all of this, and I have much the same feeling about it.

I don't buy any dark market stuff, so you'd think I wouldn't be worried so much about anonymity, but I am.  I would hate to see cash done away with and merchants only accepting crypto--or any other form of electronic payment.  I'm therefore not crazy about the idea of a government creating its own cryptocurrency, but we'll see how this plays out.  I'm not exactly a Marshall Islands citizen.

Speaking of crazes, these little island countries are the same ones having mints create all of these "collectable" silver coins, often with American themes like Superman or whatever, just so they can make a little money on a fad.  I can't recall if Marshall Islands is one of those countries, but I've seen those coins being pumped out of Niue of all places, a country I've never even heard of.  They make Star Wars and Disney-branded coins, which seems ridiculous to me.

[senin]

How much I realized that these Islands are an offshore zone for cashing in and money laundering. I'm sorry for being direct, but it is...
To raise the economy to a new level. They want to create their own coin. I.e. as I understand the scheme.
bitcoin or altcoin is exchanged through their Bank for a sovereign coin and then withdrawn to their debit card or left on Deposit in the Bank? A clever scheme, that's what I can say...

Yes, from the point of view of the Marshall Islands, this is a pretty clever decision. This state can decently earn on the crypto currency. Especially, if there will be opened decentralized exchanges and generally favorable attitude to the crypto currency. The International Monetary Fund does not want to release this state from its financial bondage, so they are dissatisfied with this decision.

[el kaka22]

Boosting the economy has been a major challenge for a lot of countries, which apparently includes the Marshall Island in this case.

For a demographics with low access to credit and loans, for the fact that there is a huge inaccessibility to the banks, we already believe that going the digital way could be the solution to some of their problems but not entirely the whole solution as government themselves will have a huge part to play. IMF could have come out with some little bit of their own worries if this eventually gets through, which some are reasonable, but no one can tell at this stage if the potential benefit will be smaller than the repercussions or not.

[Hydrogen]

How is an ICO giving an opportunity to somebody who is out of money, in debt and with a bad credit history?
You have said "who are unable to afford the minimum balance of a bank account", what can those invest?
20 cents? And 20 cents in what, this is the main problem!

A sovereign currency..which will use a currency that could be mined by everybody...highly secure /s
A currency issued by a country which without any foreign help will be bankrupt in less than a year
A currency issued by the Islands' government but it is aimed at 90% at foreign investor.....

I see so many red flags I have a deja-vu from the URSS times, no wonder the IMF is also against their plain as is just to sell some coins and hope the money will pour like magic.

Island nations tend to be dependent lacking the ability to produce natural resources and aspects of modern life on their own. They often depend upon foreign powers for import of oil, minerals, metals, food, equipment and other things. This dependency status could be magnified by having a single bank in the region which amounts to something resembling a centralized monopoly.

In regions like africa where financial institutions have forms of centralized control. It is often accompanied by high rates, poor service, high taxes and other liabilities which are terribly inefficient and largely sabotage the theory behind them existing in the first place. We witnessed this in africa last year where many africans were willing to pay upwards of $24,000 for a bitcoin. Africans are generally always willing to pay more for btc than anyone else as the fines, taxes and restrictions in their country are always far, far, worse than the peak of high bitcoin transaction fees.

People living in that type of dependent atmosphere perhaps always strive to find ways to become more independent. Maybe it will succeed or maybe it will fail. Independence could represent a type of necessity under those conditions.

They do not have to use this path, they can continue with their currency that by the way is the US dollar and can regulate bitcoin and altcoins that already exist and that the Americans also use without problems. they are totally dependent on the US, both economically and both at the level of security and the IMF is an organization that explores the poor countries and dictates the rules in all the poor countries that depend on them. It would not be too smart to face the IMF because they have a very cruel way of destroying other countries with their austerity measures.

After the 2008 economic crisis, there were many nations dependent on bailouts who were in debt and forced to live under the authority of the IMF. Eventually, some nations like iceland and hungary kicked the IMF out of their respective countries after paying off their 2008 debts.

It might be worth noting, some have managed to become independent from the IMF and its rules/restrictions. Although, if you've ever heard the false rumor about iceland giving free land to immigrants due to having a shortage of men, that could be retaliation on the IMF's part.

[lsafronova095]

After the 2008 economic crisis, there were many nations dependent on bailouts who were in debt and forced to live under the authority of the IMF. Eventually, some nations like iceland and hungary kicked the IMF out of their respective countries after paying off their 2008 debts.

It might be worth noting, some have managed to become independent from the IMF and its rules/restrictions. Although, if you've ever heard the false rumor about iceland giving free land to immigrants due to having a shortage of men, that could be retaliation on the IMF's part.

You are right to say that the IMF is trying to enslave the weak countries. After any war, or crisis, this financial institution tries to impose its rules and tries under the words: "we came in peace to give you credit" then Dictate to you their rules. There are many such countries. Ukraine. Georgia. and many others.

[magneto]

We really don't have a lot of clues from this article as to how this crypto is being managed. Whether it is going to be some sort of centralised token, or it is decentralised. Is the value going to be free floating or pegged to the dollar?

I honestly don't see the reason why the IMF is so worried, though. Sure, the token might mean that the share of US dollars within the island may drop as a result of its introduction and daily use, but other than that, I don't really understand how it would affect the financial integrity or the country's economy negatively in any way?

I'm not a big fan of a country running an ICO structured sale of their token, though. Perhaps a distribution based on a pegged USD value without the "investment" element, whether pre-sale bonuses or whatnot, would make more sense.

[koincik]

Everybody's trying to get their own crypto money. He's trying to sell. I don't think that's good.

[darewaller]

The Republic of the Marshall Islands has been warned against adopting a digital currency as a second form of legal tender.

The International Monetary Fund (IMF) said the country, which consists of hundreds of islands in the Pacific Ocean, should "seriously reconsider".

Currently, only the US dollar counts as legal tender in the islands.

A law to adopt a digital currency named "Sovereign" alongside the dollar was passed in February.

The first virtual coins are due to be issued to members of the public via an initial coin offering (ICO) later this year.

However, IMF directors said the potential benefits of the move were much smaller than the potential costs of "economic, reputational and governance risks".

"[Marshall Island] authorities should seriously reconsider the issuance of the digital currency as legal tender," wrote the directors in their report, which was first spotted by cryptocurrency news site Coindesk.

There is just one domestic commercial bank in the country and it is at risk of losing its only correspondent banking relationship with another bank in the US.

That relationship allows the Islands to transfer dollars in and out of the country.

It highlighted the Marshall Islands' dependence on foreign aid, and the fact that the country is vulnerable to natural disasters as well as sea level rise linked to climate change.

Adopting a digital currency as an official form of legal tender would threaten both financial integrity and the nation's key relationship with the US bank. The result could be disruption to foreign aid, according to the IMF.

The global financial organisation was expressing concern because it was aware of traditional banks' wariness around digital currencies, said David Gerard, author of Attack of the 50 foot Blockchain.

Those banks may, for example, associate crypto or digital currencies with criminal activity, including money-laundering, because the digital currency networks have been designed to move coins or tokens around at great speed.

"You just can't control the stuff," Mr Gerard told the BBC. "Tokens are really, really liquid, that's the whole point."

This could give the US correspondent bank cause to rethink its relationship with the Marshall Islands, he explained.

"The IMF is not strong-arming the Marshalls, what they're doing is describing what will obviously happen if they proceed - the large correspondent bank will be quite worried," he added.

https://www.bbc.com/news/technology-45485685

....

Short article for once.  

Details aren't 100% provided here. It appears the Marshall Islands are planning to adopt their own crypto currency named "Sovereign". As mentioned there aren't many details but it is plausible their economic situation is similar to that of samoa. They appear to have a single bank in their region and that sometimes means citizens have issues obtaining loans and engaging in other basic financial transactions which many take for granted.

It is possible they could see economic benefits in embracing crypto as it caters more towards those with poorer credit ratings and demographics who might typically have trouble finding support from banks for things like business, home or car loans.

Ceasing foreign aid to the Islands has also been mentioned as a potential repurcussion if the Islands choose not to follow the IMF's recommendations, here. And so we see perhaps a far cry from what happens when venezuela attempts to create its own crypto currency.

There could be interesting angles, present. I wonder what peoples thoughts on this are?

Making it a legal tender doesn’t mean it has become the country’s currency, its just to allow the people of that country to make use of it without having to worry about being punished or something, it just means that their law is not against it, so why are they being warned against it? I don’t really see anything wrong with cryptocurrency. Well, I will just say that maybe the world is not ready for Bitcoin yet, so fiat is the thing