Page 14 - IB FEB 2019

cover Story

Choosing crypto over tax free ‘utopia’

Marshall Islands work on the world’s first sovereign cryptocurrency

some of these risks, others would need to be mitigated through
institutional changes. Furthermore, the use of SOV as a means
of exchange in transactions would require significant additional
costs to upgrade RMI’s telecommunications infrastructure.”
Those who work with blockchain technology in the Pacific feel
it may be a little too early, although they will be keeping a close
By Dionisia Tabureguci watch on the initiative.

WILL the decision by the Republic of Marshall Islands (RMI) For while the blockchain, the building blocks of cryptocurrency,
to become the world’s first country to issue its own blockchain may be the subject of much hype in the international financial
sovereign cryptocurrency (SOV) be a momentous game changer? technology markets, it has only been around a decade or so,
Or is it just another pie in the sky project that jumped the gun? making crypto a nascent market with many unknowns. It may
Already, it has had its share of sceptics. be prudent to see how sovereign crypto roll outs work elsewhere,
The International Monetary Fund (IMF), in its latest Article IV before Pacific nations jump on the bandwagon.
consultation with RMI (report released in September last year), “Overall, it may be a little early,” said emmanuel Narokobi,
likened the move to issuing ‘helicopter money’, a term coined in founder/managing director of Masalai Communications in Papua
the 1960s by American economist Milton Friedman to describe a New Guinea, who is involved in a start-up aimed at using block-
hypothetical monetary policy that involves printing large sums of chain for financial inclusion. “However, with a population of about
money and distributing it to the public to stimulate the economy. 50,000, it may be more manageable and may actually work on
The IMF concern stems from the RMI’s plans to distribute a that sort of scale. Specifically, for their economy, they already rely
portion of the SOV units free to Marshallese and to a number of on the uS Dollar, so I don’t see a significant impact.”
RMI trust funds, once it is approved for distribution. Fijian blockchain pioneer ken katafono – who has just launched
Devoting a significant section of its report specifically to the his new tech start up TraSeability Solutions, the region’s first
RMI’s SOV project, the IMF cautioned the u.S. compact country traceability company - agrees.
of the many risks associated with the planned issuance, among “It is quite early considering that the more developed countries
them monetary instability and macroeconomic challenges. are taking a cautious approach. RMI are trendsetters in that re-
“Considering the significant risks, (IMF staff) recommends that gard – whether it is a good thing or not for them, only time will
the authorities seriously reconsider the issuance of the digital tell but it will be an excellent learning experience for the rest of
currency as legal tender,” IMF’s report noted. “The potential the Pacific,” he said.
benefits from revenue gains appear considerably smaller than
the potential costs arising from economic, reputational, AM/CFT, A choice between two utopias?
and governance risks. While technology may help to address This is the second project in a year that has thrust Marshall Is-

Haven of Ronjelap Zealand. The concern
there was that grant-
TWO months after RMI enacted its crypto laws in February ing RASA was akin
last year, the buzz shifted to the “one country, two systems” to creating an autono-
concept that Hong kong is known for, pushed in the Marshall mous region out of
Islands by Rongelap mayor James Matayoshi and supported by Rongelap and giving
several senators including former RMI President kesai Note and it its own political pow-
speaker of the legislature kenneth kedi. Chinese interests are ers, a move that risks
said to be also in the mix. attracting unknown
Draft legislation to set up the Rongelap Atoll Special Admin- interests with ulterior
istrative Region (RASA) was drawn up, designed to turn the motives.
remote coral atoll and former u.S. nuclear testing ground with But her own govern-
a current population of 19 people, into an autonomous invest- ment’s choice of the even more unfamiliar and poorly under-
ment haven with attractive tax benefits. stood cryptocurrency has been regarded dubiously by RASA
The RASA bill was instead thrown out, sparking outrage from supporters who have urged her to heed the IMF’s advice and
its supporters who denounced government’s preferred crypto- shelve the project before it drives away the only u.S. dollar CBR
currency choice. They moved a no confidence motion against left and unnecessarily taints RMI’s reputation, as cryptocurrency
RMI’s Head of State, President Hilda Heine and protested against has been associated with facilitating money laundering and
the SOV project during the November sitting of its 33-member terrorism financing transactions.
Parliament. While Heine narrowly survived that attack on a one However there is no sign that the Heine administration will
vote difference, she took a swipe at the instigators. budge from its cryptocurrency path.
“The vote of no confidence is really about the so-called Ron- “I don’t see any indication of us being harmed…this is not
gelap Atoll Special Administrative Region, or RASA scheme, an illicit activity,” she told the Guardian newspaper. “This is not
which is an effort by certain foreign interests to take control illegal and our laws will not be tarnished.”
of one of our atolls and turn it into a country within our own Islands Business has sought comments from the President’s
country,” President Heine said in an interview with Radio New office on the choice of project but has received no response.

14 Islands Business, February 2019