The International Monetary Fund has announced that this believes the Marshall Islands should derail intends to install its own government-backed cryptocurrency to run alongside the U.S. dollar. The limited chain of islands located in the Pacific, known officially when the Republic of the Marshall Islands, recently enacted a new piece of legislation that gave the jurisdiction the green light flying insects its own digital coin.
The idea behind the proposed issuance is almost always to reduce the ongoing threats of getting isolated within the wider global monetary system, in addition to giving the domestic economy an extremely needed lift.
However, as reported by an IMF publication released yesterday, the inter-governmental organization reckon that the Marshall Islands should rethink their plans.
The IMF’s Argument
Upon further scrutiny, the IMF states that this vast majority of the nation’s economy is a result of foreign aid. This has come about as no surprise, especially one considers its constant battles with earthquakes and an ever-changing climate.
Moreover, the IMF also focuses on the fact that there happens to be only one locally based commercial bank which has had a relationship that has a U.S. lender. Known as a correspondent banking relationship, such arrangements are pivotal whenever a jurisdiction may be to have access to U.S. dollar dominated financial services. The IMF warns if the Marshall Islands proceeds featuring a plans to introduce a different state-backed digital currency, click may face risking potential not only losing admittance to development aid, but U.S. dollar based markets of their entirety.
Regarding the planned digital currency issuance, one of many key concerns belonging to the IMF is the lack of safeguards in place to counter the health risks of money laundering and terrorist financing abuse. The way it stands, the Islands have provided no details available for their proposed study strategies, that is something that might be the final nail within the coffin for its relationship in the U.S. based bank.
The comments outlined inside the report lead to an interesting reading, which include because they supplies a stark reminder on the challenges placed on creating a domestic monetary system that falls right out of the remit on the traditional banking sector.
Nevertheless, the Marshall Islands will have to think long and hard about its second step. Does it proceed because of its plans and face your schedule of losing its long-standing relationship which has a U.S. based bank, or did it play it safe and tune in to the advice within the IMF?