The small nation of about 53,000 people is located in the middle of the Pacific Ocean is quietly working on a project that could have a major impact on how cryptocurrency is treated by both investors and government actors.
The Marshall Island is launching its own national cryptocurrency token named the Sovereign, or SOV, which will be legal tender for citizens and businesses on the island and worldwide.
This plan was created by Israeli fintech company Neema. It is the idea of CEO Barak Ben-Ezer who looked for countries that do not have their own currency to implement it. The Marshall Islands, despite being a republic since 1982, uses the US dollar as its medium of exchange and tax payment method.
Ben-Ezer said that when Neema showcased the idea, he received a few skeptic comments and mixed thoughts from the officials in government. On the other hand, the President Hilda Heine Ministry of Finance showed a positive interest in the matter.
“Luckily the president became infatuated with the idea and its promise,” Said Ben-Ezer “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 onboard.”
It seems now that anything is on track, but how will things go on from now?
The Support from the Government
The SOV currency will be pegged and compared to USD, as demonstrated by David Paul, the VP of the Marshall Islands. As far as things go for fiat money, The government has no will of replacing it for now.
One thing’s for sure - The first period of SOV is the period that will decide its fate. If it’s going to be popular among people and business, it seems things will go great. The most important initial event will be the coin offering - Which will allow people to buy the cryptocurrency in exchange for another currency. Ben-Ezer assumes that each token will be sold for around 100$.
The hard cap will be placed at 24,000,000 tokens, and is supposed to start by the third quarter of 2018, as according to Minister Paul.
SOV is backed by the government, what provides some stability for users and will be treated just like regular money. In late February, the government – the island has no central bank authority – passed the Declaration and Issuance of the Sovereign Currency Act to make all of this possible.
For a cryptocurrency, it’s quite a meaningful step but on paper it still appears to be a bizarre proposition. Cryptocurrency’s original selling points were based on zero government influence and no central authority. The idea of a cryptocurrency issued by a state contradicts that.
“It’s important to emphasise that this cryptocurrency, the Sovereign, is completely decentralized and the government cannot control the money supply. After the [crowd sale], they don’t have any control over the currency, it circulates, and the money supply is predetermined on the blockchain,” explained Ben-Ezer.
“That was agreed together and it’s kind of going back to the days of the gold standard,” Ben-Ezer continued. “If you go back in time it used to be that when governments wanted to issue more money, they had to bring aboard more gold. They couldn’t just start the printers.”
According to Ben-Ezer, the SOV project gained interest among a few big financial institutions and investment firms - But he declined to say who they were.
The sov is said to launch on the Ethereum network build with the erc20 standard, that alone could get it a lot of attention from the crypto community as it could be a game changer for it being a bridge between FIAT and crypto.
Giving a better image to the Marshall Islands
The Marshall Islands isn’t the first country to attempt this. for example, Venezuela has created its own cryptocurrency called Petro, which is pegged to the price of oil and backed by the country’s oil reserves to generate funds and evade US sanctions. Other countries like Russia and Iran have played with the idea of a government-controlled cryptocurrency too.
On the smaller scale, rap singer Akon plans to build a new city in senegal to use it’s very own cryptocurrency called Akoin, few details are known about the project so far, as the rapper leaves technical issues to “the geeks”.
“While there is understandable concern by policy makers and regulators worldwide of the misuse of cryptocurrencies for tax evasion, money laundering, and terrorist financing, the SOV is designed on purpose to be unusable for these purposes,” countered Minister Paul.
A KYC process will be mandatory to be able to take part in the SOV IMO (initial money offering), after the IMO, people will be able to buy in on regular exchanges, as well as in official banks worldwide.
“They issue to you an identity token, so each SOV wallet is associated with an identity token. You cannot send money out of an SOV wallet unless you have this identity token,” said Ben-Ezer. “In this manner, the funds within SOV always move between identified and verified wallets.”
As far as Kossow, one of key phases will be the verification process that aims to prevent cases of money laundering - A failure of that magnitude may cause investors to lose faith at the project.
“Law enforcement will be able to request, with appropriate authorisation, access to the source of funds that a person has received. This information will be recorded in the blockchain, and is unalterable,” added Minister Paul on the steps the government is taking to thwart illegal activity with the SOV.
The fact that we have a country that took a decision to use a cryptocurrency as its legel tender can create a chain reaction, whereas the regulations and opinions about crypto may get a whole different approach.
“So now the SEC cannot really say it is a security and the CFTC cannot say it is a commodity and the IRS cannot say it is property,” said Ben-Ezer, referring to the various regulator definitions of cryptocurrency in the US. “It’s money, it’s just like the Shekel, the Euro, the Yen.”
Ben-Ezer believes that the Sovereign and the Marshall Islands start the revolution and inspire other countries to follow their footsteps.
“Sovereign will be a portal between those two worlds by virtue of being a fiat currency and a cryptocurrency,” Ben-Ezer adds. “Our idea here is to create a Panama Canal between the world of fiat currencies, banks, and Wall Street and cryptocurrencies.”
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