IMF recommends Marshall Islands not to issue national cryptocurrency

The Republic of the Marshall Islands, which planned to issue a digital currency as a legal tender, received a negative recommendation from the International Monetary Fund. The IMF advised to abandon these plans.

The IMF recommended that the Pacific state in Micronesia refuse its plans to issue sovereign cryptocurrency. The Marshall Islands is an associated state with the United States, and the US dollar acts as a legal tender on the territory of the islands. But recently, the republic's authorities proposed issuing their own cryptocurrency, which will help to tackle the problem of dependence on the US dollar, its financial system and associated financial channels.

The idea of ​​issuing its own cryptocurrency emerged as the Marshall Islands' only commercial bank faced a growing risk of being switched off from its correspondent accounts in US banks due to tightening of regulatory requirements in the US.

But this idea was not supported by the International Monetary Fund.

"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 report reads.

The IMF warns that the disruption in external aid and other flows would have an extremely negative impact on the economy of the Marshall Islands.

In May, the government of the Marshall Islands approved amendments to the legislation. The authorities revealed their plans to issue the digital currency called Sovereign with limited supply of 24 million coins. They were planned to be distributed via ICO and private presales.