- Marshall Islands' central bank digital currency will launch on Algorand blockchain.
- The island nation aims to reduce its reliance on the US dollar, which is currently its national currency.
- The IMF previously warned against the project.
One of the world’s first central bank digital currencies will be built on the Algorand blockchain, the Algorand Foundation announced today.
The Republic of the Marshall Islands, which achieved independence from the United States in 1979, has had plans for a state-backed digital currency—the Marshallese sovereign (SOV)—in development since February 2018. The coin is designed to reduce the small island nation’s reliance on the US dollar, which is currently the Republic’s national currency.
Given the islands’ remoteness, a blockchain-based digital currency would also help cut down on cross-border transaction fees, wrote David Paul, the Minister-in-Assistance to the President of the Marshall Islands, in an essay in September 2019.
In a statement, Jim Wagner, co-founder and CTO of SFB Technologies, which is producing the coin, said that Algorand was selected because it has the “functionality required to issue, manage and distribute the SOV on a global level. This partnership ensures that the SOV will be built on a scalable and secure platform.”
The sovereign’s supply will grow at 4 percent each year, and will be introduced through a token pre-sale, which is expected to begin this year. People can buy rights to the coin through auctions, which will be released after a set period of time.
But not everyone is onboard with the Marshall Islands’ plans for its own central bank digital currency.
The International Monetary Fund, for instance, sharply criticized the Republic’s plans to issue a digital currency. In a September 2018 report, it advised against the issuance, and warned of the "potential costs arising from economic, reputational, AML/CFT, and governance risks" that might arise.
And, in November 2018, eight legislators voted on a motion of no confidence against the then-incumbent president, Hilda Heine, partly due to her decision to issue the SOV.
Nevertheless, the Republic of the Marshall Islands appears poised to move forward. And once the coin’s logged on the Algorand blockchain, there will be no going back.