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lands into the limelight and raised experts in these fields working with us.
eyebrows, in part because they “I am not saying this is easy. But as the speeches of the IMF
seem utopic and in part because managing director Christine Legarde highlighted, distributed
the country itself is still struggling ledger technology (or blockchain) holds a lot of promise for
with fundamental economic is- businesses and for countries, and quite a few central banks are
sues, as evident in the IMF Article working on this. I am convinced that we will see official digital
IV Report. currencies emerge within the next few years, and I hope the SOV
One important risk on the radar would be the first and an example for others to follow,” Dittus said.
now is the potential loss of RMI’s
last uS dollar CBR (Correspon- Usability concerns
dent Bank Relationship) with a So where does all this leave the end user – the ordinary citizens
u.S.-based bank due to increased of Marshall Islands?
scrutiny. A similar sovereign crypto journey taken by Venezuela not
SOV Project leader, Peter dittus Annual renewal of this CBR is too long ago quickly faded into obscurity when it became clear
conditional on ongoing progress in that citizens could not buy or sell anything with it, and the so
the improvement of the country’s called ‘Petro’ hype became ‘Petro’ regrets for its supporters. That
anti-money laundering and combatting the financing of terror- is cautionary tale as to how such a project can start off with a
ism framework (AML/CFT). The planned issue of the SOV has bang and end in a whimper if at the end of the day, the end user
further increased the risk of Bank of Marshall Islands losing its cannot use it.
remaining CBR, according to the IMF. This is one of the reasons In Narokobi’s view, if one can make e-commerce work with
why it is advising the northern Pacific archipelago to ditch the cryptocurrency, then it is proof that the blockchain concept works.
project, for to lose the CBR would be to disrupt aid flows and What remain to be seen therefore is usability. It’s the same con-
other income flows and drag the economy considerably before cern expressed by Marshallese, at least according to katafono
another option is found. who regularly visits RMI for business.
It isn’t an easy ask for a country that is faced with an impend- “From my interactions in RMI, the everyday folk question its
ing loss of major revenue source when that source finances over intentions and utility there. Some even view it as a tool for the elite
50 per cent of government’s budget each year. RMI’s Compact to make more money,” said katafono, adding that, if anything,
Agreement with the u.S. expires in 2023 and it has understand- digital literacy will be another big challenge.
ably been exploring its options. “With cryptos will come the need for having crypto wallets and
SOV project leader Peter Dittus told this publication via email managing private and public keys, etc. People are just getting
that because SOV will become an official legal tender of a country, their heads around eFTPOS. Credit cards are not so prevalent or
a lot of work will be put into creating the necessary groundwork accessible to everyday folk so how will we address the introduc-
that will make it a serious and responsible one, with special tion of something like cryptocurrency?”
emphasis upon the prevention of money laundering and terror- According to Dittus, these are concerns that the SOV design
ist financing. has already considered, hence, not only will they make SOV as
“Crypto assets have gotten a bad name because of their misuse safe as any other existing digital payment solutions, it will also
for markets such as Silk Road, therefore there is understandable be as freely convertible and transferable, subject, of course, to
concern. The SOV will address this head-on. All users will need AML provisions.
to undergo kyC (know-your-Customer) rules in line with inter- “SOV coin will be held in a digital wallet, typically on a smart
national best practice; exchanges that trade in SOV will need to phone or a smart card,” DIttus explained. In the RMI, all citizens
be licensed and will be subject to regulatory oversight. In general, will receive a certain amount of SOV for free. In order to spend
SOV will have exemplary AML and CFT measures implemented. them at merchants, they will need to present their phone or card
This is clearly necessary for a serious digital currency of a re- to a point of sale terminal and prove their authorisation through
sponsible country,” he said. a PIN code or a fingerprint. In general, the holding and payment
Dittus, an economist by profession, is a former Secretary of with SOV will, for all intents and purposes, not be different
General of the Bank of International Settlements (BIS), an inter- from using other digital solutions currently, such as prepaid cards.
national financial institution owned by the world’s central banks. It is clear that it will take time for everyone to espouse digital
Project SOV has also secured the services of blockchain special- payment technologies. And there is also no hurry because the
ist Steve Tendon, who will help with the drafting and designing uS Dollar will also continue to circulate, thus allowing citizens to
of regulations, obviously one of the major ‘unchartered waters’ gradually move to a more active use of the SOV. In terms of the
aspects of a sovereign crypto, if not the crypto world itself. design, the SOV ecosystem will lay great stress on user friendli-
“There is no shortage of challenges but there are also solutions, ness, such that someone who can use a smart phone or a credit/
and some of them we will be developing,” said Dittus. debit card, will also be able to use SOV. The management of keys
“A challenge is to design and more importantly, to implement will be done in the background by the software.
the SOV ecosystem. Not just the blockchain itself but also the “We want SOV to be usable for normal people. The govern-
POS (Point of Sale) terminals, the wallets, the communications, ment’s intention is clearly that the SOV is a real sovereign currency
as well as the key market participants that make SOV effective as described in the law…citizens will be able to buy goods and
as a real currency, such as exchanges and banks. services domestically, otherwise, the SOV would hardly qualify
“Another challenge is regulatory, designing the currency in as money and it would simply be another crypto asset. But of
such a way that it conforms and is accepted by international course, the challenge is to implement the required infrastructure.
financial institutions, passing the FATF [Financial Action Task As the RMI is not a large country, this is more easily done there
Force] requirements that are currently being adapted to cryp- than in large countries,” said Dittus.
tocurrencies. We are working on those challenges with a great
and dedicated team and have been able to have some of the top r dtabureguci@gmail.com

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