The Marshall Islands is creating its own digital currency in a bid to raise money. In doing so it becomes the first country in the world to recognize a cryptocurrency as legal tender.
The small Pacific Island nation passed the Sovereign Currency Act to create the ‘sovereign’, or SOV on Monday, following days of debate. The cryptocurrency will have equal status with the US dollar and, unlike many cryptocurrencies, users will have to reveal their identity in order to use SOV.
“This is a historic moment for our people, finally issuing and using our own currency, alongside the USD (US dollar),” President Hilda Heine said in a statement. “It is another step of manifesting our national liberty.”
The Marshall Islands uses the dollar as its currency under a Compact of Free Association. It’s an agreement under which the US gives the country about $70 million each year, and has a military base on one of the islands, Kwajalein Atoll. In 2023, US aid will fall by half to $30 million, “causing high risk for the country’s budget stability,” the Marshall Islands said.
The Pacific Island nation will issue 24 million SOVs in an Initial Currency Offer. Half will go to its government, and the other half to Israeli company Neema, which will sell some of the currency under a partnership to launch the cryptocurrency. Some lawmakers were concerned about the amount of the currency going to the company, while others argued the cash would help with the country’s urgent needs, the Star reports.
The islands will distribute 2.4 million SOVs to its 67,000 residents. Six million SOVs will be sold to international investors.
“Allocating SOV units directly to the citizens will circulate the currency and distribute wealth efficiently to our people,” Heine explained. “In addition, The RMI [Republic of the Marshall Islands] will invest the revenues to support its climate change efforts, green energy, healthcare for those still affected by the US nuclear tests, and education.”
The country’s Nuclear Legacy and Healthcare Fund helps those affected by nuclear weapons testing the US conducted on the islands between 1946 and 1958. One of those devices was 1,000 times stronger than the bomb dropped on Hiroshima, Japan at the close of the Second World War. A recent Columbia University study found radiation levels are double what is considered safe on Bikini Atoll.
“We are excited to be the world’s first nation to leapfrog into the era of digital currencies. Ten percent of our proceeds from the ICO will be directed towards a Green Climate Fund, to help us fight the effects of global warming, coming from the burn of fossil fuel by the large industrial nations, and hurting the small Island Nations the most,” Minister in Assistance to the President David Paul said.
Last month, Venezuela was the first country to launch its own cryptocurrency, the Petro. No other country has made cryptocurrency a legal tender, although a number of countries accept it as a means of payment. Israeli tax authorities recently announced that cryptocurrencies are taxable assets, and sellers will have to pay capital gains tax of 25 percent.
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