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Cryptocurrencies

IMF: Marshall Islands should reconsider adopting digital currency

Friday 14 September 2018 | 10:44 AM CET

The International Monetary Fund (IMF) has warned the Republic of the Marshall Islands about adopting a digital currency as a second form of legal tender.

Currently, only the US dollar counts as legal tender in the islands. A law to adopt a digital currency named “Sovereign” alongside the dollar was passed in February 2018 and the first virtual coins are due to be issued to members of the public via an initial coin offering (ICO) later this year.

However, IMF directors said the potential benefits of the move were much smaller than the potential costs of “economic, reputational and governance risks”. Since there is just one domestic commercial bank in the country, it risks losing its only correspondent banking relationship with another bank in the US.

That relationship allows the Islands to transfer dollars in and out of the country. Notably is the fact that the Marshall Islands depend on foreign aid in the case of a natural disaster occurring, and that the US bank could disrupt sending the aid. Also, there is the concern that crypto or digital currencies could be associated with criminal activity, including money-laundering.

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