In March, the Marshall Islands signed a bill into law stating that a new cryptocurrency, the Sovereign (SOV),  would be the official currency of the islands. The small island is seeking to gain sovereignty from the US dollar and all the challenges that come with using it, although the US dollar will still be accepted alongside the SOV.

While the country may only be home to 53,066 people, they are still the first to completely transition to a national cryptocurrency and are the leading of example of what this might look like, at least on a small scale.

Adopting a cryptocurrency as a national currency brings its own set of challenges. Last week, through an announcement by Swiss wallet startup Tangem, we learned how exactly the Marshall Islands plans to make its new currency accessible and usable.

The answer is physical banknotes.

Some may wonder what the point is of having a digital currency if the country is still going to use physical bank notes.

The most important benefit of a cryptocurrency is not that it is digital. It isn’t that you can send money online. People have been sending money transfers via the internet for years. They key benefit is that the money system and means of transfer are not controlled by a government, corporation, or any entity. This means the money requires less trust and doesn’t imbue an organization with power over currency.

The Marshall Islands has latched onto this aspect of cryptocurrency, so by creating physical banknotes, it is leveraging the benefits of a decentralized blockchain based currency without requiring citizens to know how to work a wallet, manage private keys, or do anything else besides hand over a bill — as they have done their entire lives.

The physical notes contain a physical card secured with a blockchain-enabled microprocessor. Citizens will be able to simply hand the bills around which contain the cryptocurrency, and if they ever wanted to directly access the cryptocurrency they could transfer the value from the bills to their digital wallets.

This solves several key problems with widespread adoption of cryptocurrencies.

  1. It enables a huge amount of transactions to happen off-chain reducing processing requirements on the blockchain. It is an infinitely scalable transaction mechanism that doesn’t require computing resources. It is the thousand-year-old version of Bitcoin’s Lightning Network.
  2. Transactions will have zero-fees as they occur off chain, maintaining the same experience of money Marshall islanders have always had.
  3. It doesn’t require citizens to have an internet connection or computer/cryptocurrency literacy in order to use the money, which would be a huge roadblock.

What is so important here is that by creating physical notes, the burden is shifted off the technological infrastructure, and access to money is not limited by computer ownership and knowledge.

The approach that the Marshall Islands have taken paints a picture of what national adoption of a cryptocurrency could look like. The road to national adoption of cryptocurrency will have different needs from the way Bitcoin rose to prominence, and the incorporation of physical cryptocurrency banknotes is likely to become the norm.