The Marshall Islands has created its own cryptocurrency, the Sovereign (SOV), and declared it the new official currency of the country, replacing the US Dollar. The bill creating the SOV was signed March 1, 2018. The SOV will now be the official legal tender for businesses and the 53,000 or so citizens of the Pacific Islands.
This is a significant move because now financial institutions, including banks and credit transaction processing companies, will be forced to accept a cryptocurrency as the official currency of a sovereign nation. Even though the Marshall Islands have been a sovereign nation since 1982, they have continued to use the US Dollar their official currency, until now. It is expected that the use of the SOV will occur in conjunction with acceptance of US Dollars, and the country has indicated that it has no plans to completely replace its fiat money with the SOV.
The SOV was the brainchild Israeli tech company Neema CEO Barak Ben-Ezer was the one to bring this plan to the Marshall Islands, and after winning support of the Marshall Islands President Hilda Heine and the Marshall Islands Ministry of Finance, the plan went into action. Neema facilitates international money transfers via an app, and is developing the SOV’s underlying technology using a public protocol known as “Yokwe.”
Ben-Ezer said, “Luckily the president became infatuated with the idea and its promise. She immediately understood that there’s big potential here for the country and they were basically lobbying for that and convincing the other ministers until most of them were on board.”
Ben-Ezer also told Hard Fork that he expects that each SOV token will be priced at roughly $100. Marshall Islands Minister David Paul said that the number of SOV tokens will be capped at 24 million, and that their sale is expected to commence during the third quarter of 2018.
The text of the bills reads, “The purpose of this Act is to declare and issue a digital decentralized currency based on blockchain technology as legal tender of the Republic of Marshall Islands.” President Heine told Finance Magnates, “This is a historic moment for our people, finally issuing and using our own currency, alongside the USD. It is another step of manifesting our national liberty.”
It is important to note that the SOV is backed by the government of the Marshall Islands, which offers investors and users a sense of stability and certainty, and the assurance that the SOV will be treated the same as regular tender. The country has no central bank authority, but the government passed the “Declaration and Issuance of the Sovereign Currency Act,” which officially cemented the creation of the SOV, on February 26, 2018.
The government is intending to use the Initial Coin Offering (ICO) of the Sovreign as a way to help the economy, in anticipation of reparation payments by the US ending. It has been reported that seventy percent (70%) of the money from the ICO will be allocated for offsetting the impending budget gap caused by the end of the payments by the US; ten percent (10%) is slated to go towards sustainability projects (including green energy initiatives), and the rest will be dispersed among the citizens of the Marshall Islands.
This is a significant step forward for cryptocurrency, as this is the first time that a sovereign country has declared a cryptocurrency (especially one of their creation) to be the official currency of their nation. The SOV differs from the cryptocurrency issued by Venezuela (the Petro) in that the SOV’s price will be determined by the market, and is not backed by or tied to oil reserves. This move adds a significant amount of legitimacy to the industry as a whole, and will hopefully be implemented smoothly and without major hiccups, in a move that will hopefully show regulators and governments around the globe that cryptocurrency is a viable means of commerce.