The Marshall Islands will soon circulate physical banknotes representing the world's first decentralized national digital currency. This is happening under an agreement with Tangem, a Swiss maker of blockchain-enabled smart card wallets for cryptocurrencies.
"We are excited to partner with the Republic of the Marshall Islands to do something that has never been done before: issue a digital currency as official legal tender," Tangem co-founder Andrey Kurennykh gushed in a statement.
Smart Card with Microchip and NFC Antenna
The physical banknotes will take the form of a smart card powered by a blockchain-enabled microprocessor. Tangem says its technology enables users to store and carry cryptocurrencies on plastic cards with a chip and NFC (Near Field Communication) antenna inside.
Once issued, the digital currency ― called the Sovereign (SOV) ― will join the U.S. dollar as the official legal tender of the US-associated state.
The Marshall Islands is located in the Pacific Ocean and has a population of 53,000 people. Its small size makes experimenting with a new currency a useful trial run before mass adoption could ever occur in a larger population center.
No Fees and Immediate Transaction Validation
Tangem says its card users can enjoy zero fees and immediate transaction validation. Moreover, the company claims that transactions do not require end users to have an Internet connection.
Tangem banknotes will enable the off-chain physical circulation of the Sovereign among all SOV holders and will not impose the technical infrastructure burden on the [Marshall Islands].
As CCN reported, the Marshall Islands was recently rocked by political turmoil. In November 2018, President Hilda Heine was almost voted out of office thanks to a no-confidence vote that threatened to derail her presidency. She survived the challenge.
IMF Opposes Island's New Digital Currency
Meanwhile, the International Monetary Fund (IMF) vehemently opposes the Marshall Island's plans to launch the Sovereign.
In September 2018, the IMF urged the island to not create a national cryptocurrency, citing macroeconomic risks and money-laundering concerns.
“The issuance of a decentralized digital currency as a second legal tender would increase macroeconomic and financial integrity risks, and elevate the risk of losing the last U.S. dollar correspondent banking relationship," the IMF said.
However, David Paul, the minister-in-assistance to the president of the Marshall Islands, said the island has the right to roll out a national currency as part of a move to reduce its dependence on the U.S. dollar.
“As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form,” Paul said.