According to reports, the Republic of the Marshall Islands plans to issue its own cryptocurrency, the Sovereign (SOV), which would be treated as legal tender along with the US dollar.
This has the potential to affect the country's relationship with the United States, which has long provided defense for the small nation.
This week, it was reported that the Republic of the Marshall Islands, a country of 53,000 people in the Central Pacific Ocean, has taken steps to prepare for the issuance of its own cryptocurrency, Soverign (SOV). The main distinguishing feature of the SOV is its adoption of the "Yokwe framework", an identification protocol that aims to avoid the relative anonymity of some other cryptocurrencies.
Ostensibly, users would be required to identify themselves in a blockchain network, a step that the government believes would make the Sovereign suitable for a regulated banking system. The "Yokwe frame" (or "Yakwe frame", an alternative orthography) does not seem to be connected to any cryptocurrency that already exists. "Yokwe" is a marshal word, which means "hello".
ICO de Sovereign
The SOV will be issued to the public through an initial offer of currencies (ICO), with its offer limited to 24 million tokens in an apparent effort to curb inflation. Paul told Reuters that the 24 million tokens correspond to the 24 inhabited islands of the country, or atolls, each of which functions as a constituency.
It is not clear whether the SOV will be linked to the dollar or some other unit, and how much each token would cost initially has not been reported. The ICO date has not yet been determined, but Paul said the presale will begin "soon."
It is not clear if the SOV will be launched on an existing blockchain platform (for example, as ERC20 on Ethereum), or if the Marshall Islands will start from scratch.
If the Republic of the Marshall Islands is worried about inflation, going to the other extreme with a fixed money supply seems a strange approach. Deflation can be so damning for an economy.
A fascinating experiment
If everything goes according to plan, the Marshall government would have reserves to use in its environmental, health and education initiatives, and its citizens will adopt a new currency. The government would essentially distribute a new currency to its citizens and double any money that comes through ICO, which is a very unusual way to inject more money into Marshallese's economy.
It is very difficult to determine how the value of the SOV and the dollar will interact in Marshall's economy, but perhaps there will be an initial inflationary peak, which will level out over time.