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September 12, 2018 02:05 am

Marshall Islands Warned Against Adopting Digital Currency

The International Monetary Fund (IMF) is warning the Republic of the Marshall Islands to "seriously reconsider" the idea of adopting a digital currency as a second form of legal tender. As it stands, the U.S. dollar is the only legal tender in the islands. The BBC reports: A law to adopt a digital currency named "Sovereign" alongside the dollar was passed in February. The first virtual coins are due to be issued to members of the public via an initial coin offering (ICO) later this year. However, IMF directors said the potential benefits of the move were much smaller than the potential costs of "economic, reputational and governance risks." "[Marshall Island] authorities should seriously reconsider the issuance of the digital currency as legal tender," wrote the directors in their report, which was first spotted by Coindesk. There is just one domestic commercial bank in the country and it is at risk of losing its only correspondent banking relationship with another bank in the U.S. That relationship allows the Islands to transfer dollars in and out of the country. It highlighted the Marshall Islands' dependence on foreign aid, and the fact that the country is vulnerable to natural disasters as well as sea level rise linked to climate change. Adopting a digital currency as an official form of legal tender would threaten both financial integrity and the nation's key relationship with the U.S. bank. The result could be disruption to foreign aid, according to the IMF.

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