The International Monetary Fund notified the Republic of Marshall Islands about all the dangers of using cryptocurrency as a second legal tender, according to a press release published earlier this week.
Based on the report, the U.S based agency addresses the Republic of Marshall Islands, stating that adopting the digital currency as a form of legal tender has potential and serious risks to the financial integrity and relationship with other foreign banks.
By using the digital currency as the second official currency, the Bank of Marshall Islands will have an increased risk of losing the correspondent banking relationship (CBR). This is the result of diligence by a range of banks in the U.S. Not only do Marshall Islands receive the U.S. grants, they also spend the incentives. Because of this, the International Monetary Fund states that the loss of important and long-term banking relationships could extremely and potentially affect the country’s economy.
Furthermore, the International Monetary Fund believes that all costs of using the cryptocurrency, including the counter financing of terrorism policies and enforcement of anti-money laundering are considered smaller than other financial gains. They also added that the benefits from revenue gains are not as big as the costs that arise from reputational, economic, governance, and AML and CFT risks. With the absence of ample and effective measures to alleviate them, the authorities should take time to reconsider the issuance of the cryptocurrency as legal tender.
The International Monetary Fund urged the authorities of the Republic of Marshall Islands to reconsider issuing the digital currency until they can offer and implement strong and realistic policy frameworks in terms of governance, economic, AML/CFT, and reputational risks.
With a population of more than 53,000, the Republic of the Marshall Islands revealed all its plans to release its very own cryptocurrency, which is dubbed the Sovereign (SOV) early this 2018. As Marshallese officials claimed, the currency would be an excellent and brilliant step to show their national liberty to other countries in different parts of the globe.
The Sovereign will be a perfect and useful alternative to the currency of U.S. dollar. Plus, the Marshallese government plans to totally distribute the official cryptocurrency with the use of Initial Coin Offering (ICO). The long wait of people to use the digital currency would be worth it and meaningful.
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