The International Monetary Fund (IMF) has exerted pressure on the Marshall Islands to torpedo its proposed crypto. The move by the Washington-based global financial institution has been cited as evidence of the steps central bankers will take to thwart cryptocurrency adoption. The Marshall Islands’ decision could have ramifications that extend far beyond the confines of the Pacific island country.
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IMF Leans On the Marshall Islands
Back in March, we reported on the Marshall Islands’ plan to introduce a national cryptocurrency, the Sovereign (SOV). It was to be distributed to the islanders and special provisions would include facial recognition built in to prevent money laundering. The IMF has now advised the Marshalls against proceeding in no uncertain terms, issuing the sort of apocalyptic warnings that cryptocurrency users have become accustomed to.
In a 58-page report, the IMF warns of US banks refusing to work with Marshall Islands businesses should the national crypto be adopted. To all intents and purposes, this would cut off banking services to the islands’ 53,000 residents. Given that the proposed national crypto is to be launched via a modest $30m initial coin offering plus an airdrop to local residents, the IMF’s stance seems both hyperbolic and draconian. The report warns:
The potential benefits from [digital currency] revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks. In the absence of adequate measures to mitigate them, the authorities should seriously reconsider the issuance of the digital currency as legal tender.
Bullying the Little Guy or Just Looking Out for Them?
The IMF’s warnings over the fate of the Sovereign could be uncharitably described as “FUD”. Its report speaks starkly of “the potential for digital currencies to be misused for money laundering and terrorist financing”, which simply isn’t feasible with the SOV’s low market cap and KYC/AML provisions. As news.Bitcoin.com reported earlier this week, terrorists prefer cash to crypto, and will have zero interest in using the Marshall Islands’ national digital currency.
The self-governing territory has been free from US rule since 1979, but continues to use the US dollar. The islands’ diminutive size and close ties to the US are likely to be the primary reasons for the IMF strong-arming the Marshalls. If they were to attempt the same move with Iran, which is also pondering a national currency, their protestations would be given short shrift. The IMF appears to have been feeling the heat from cryptocurrencies, whose existence could eventually threaten its own. Should state-backed cryptos, or a decentralized currency such as bitcoin, attain mass adoption, the IMF and its acolytes would see their power diminish.
An article published in June by the IMF’s deputy director Dong He warned that “Crypto assets may one day reduce demand for central bank money” and predicted that central banks may need to “forestall the competitive pressure crypto assets may exert on fiat currencies”. Other nation states considering introducing their own crypto will be watching the Marshall Islands closely to see how it responds to the IMF’s unbridled attack.
Do you think the IMF is being unfair on the Marshall Islands or is it just looking out for their national interests? Let us know in the comments section below.
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