A Marshall Islands official has explained a new blockchain-based currency with a fixed supply in an essay published just before the Invest: Asia 2019 conference.
The essay from The Honorable David Paul – Minister In-Assistance to the President & Environment – discussed the launch of the Marshallese Sovereign (SOV) and was published on September 4th.
Last year, the country had passed a Sovereign Currency Act and it clearly hinted to the release of a new digital currency at the national level. The nation got its independence in 1979 and since then the US dollar has been the country’s official currency used for all sorts of payments, debts, taxes, public charges, and dues.
The country relies on almost $70 million in US grants every year, as reported earlier in 2019.
The essay from Minister Paul mentions that the Islands decided to launch a blockchain-based second legal tender due to the conviction that any centralized solutions aren’t practical for a country with 50,000 people inhabiting more than 1,000 Pacific Islands.
Besides offering a decentralized solution, blockchain provides the Marshall Islands the chance to have compliance “baked into the currency protocol itself while maintaining privacy for individuals,” says the Minister.
With this technology, the state will be able to automate most of the compliance obligations, reducing the costs of current systems and, hence, allowing it to fight money laundering as well as terrorism financing more proactively.
Approved entities – like exchanges and banks – will take care of the identity verification process for the SOV users, and hence the anonymity loopholes will be closed. Still, the minister believes, the state will try and protect the financial privacy of the users as much as possible, saying that:
“It is crucial that individual users should have a reasonable expectation of privacy – specifically, the ability to choose when to disclose your information, what exactly to share, and with whom.”
The essay also outlines that currently the fiat remittance services are quite expensive and the frictionless systems based on blockchain can be helpful in mitigating the issue.
The minister stated that this new digital currency will have a fixed and tamper-proof supply with a predetermined growth of 4% a year:
“We chose to create a fixed money supply with fixed growth because fiat currencies can be remarkably unstable. […] The policies of major central banks are not reassuring, as the gold and bitcoin prices attest. We as governments need to take a more sustainable approach to money, and not treat it as a limitless resource.”