NEW YORK (Reuters) – The Marshall Islands will issue its own cryptocurrency that will be circulated as legal tender along with the U.S. dollar, according to one of the remote Pacific republic’s top officials.
The new currency will be called SOV and its legal tender status has been approved by the country’s parliament, said David Paul, minister-in-assistance to the president of the Marshall Islands, in an interview with Reuters late on Tuesday.
“This is the way of the future,” said Paul. “As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form.”
Plans for possible sovereign cryptocurrencies have gained momentum in recent months, as digital tokens launched by private companies have jumped in value. Several governments, including China, Estonia, and Iran, have discussed plans for their own digital currency.
Venezuela, meanwhile, has gone ahead with a new digital token called the petro, backed by oil. It raised about $735 million on the first day of its presale earlier this month but is not expected to attract significant investment.
Paul said the SOV will be issued to the public through an initial coin offering, a financing strategy that has become popular among startups looking to raise funds for their projects.
The country has capped the SOV supply at 24 million tokens in order to prevent inflation, Paul said. The 24 million tokens represent the Marshall Islands’ 24 municipalities, he added.
SOV will act like regular money, said the government of the Marshall Islands in a separate statement released late on Tuesday.
“This creates legal certainty for its use, because all jurisdictions have laws in place for dealing with legal tender, whereas private cryptocurrencies are dealt with differently in different jurisdictions,” the statement said.
The Marshall Islands is partnering with Neema, an Israeli financial technology startup, to issue the SOV, Paul said.
Paul said the government has not yet determined a launch date for the ICO but that a presale of the tokens to investors will start “soon”.
SOV is based on what the Marshall Islands government calls the “Yakwe framework”, which requires users to identify themselves on the blockchain, solving the anonymity problem that has plagued bitcoin and precluded its mainstream adoption.
Paul said that because bitcoin and other cryptocurrencies are anonymous, they are not compatible with the framework of a regulated banking environment.
“It was clear that there was a huge market need for a non-anonymous blockchain system that can operate within a regulated environment,” he said.
Part of the proceeds from the ICO will be used to help finance the Marshall Islands’ National Trust Fund, Paul said. The United States contributes to the fund, intended to support future generations.
Reporting by Gertrude Chavez-Dreyfuss, Editing by Rosalba O’Brien