The IMF demands that the Marshall Islands abandon cryptocurrency

Representatives of the International Monetary Fund (IMF) have officially stated that the government of the Marshall Islands should “seriously reconsider” its idea of ​​​​adopting digital currency as a second legal tender. At the moment, the only means of payment in the country is the US dollar.

The law on the adoption of a digital currency called “Sovereign” along with the US dollar was adopted in February. The first virtual coins were planned to be released and sold in an ICO later this year. 

Even so, the IMF director said the potential benefits of such an undertaking are dwarfed by “the potential risks to the economy and the country's reputation.”

“The government of the Marshall Islands should seriously reconsider the issuance of digital currency as legal tender,” the IMF director wrote in his report.

There is one commercial bank in the country that is at risk of losing its correspondent banking relationship with a US bank. Through this relationship, citizens and visitors to the Islands can transfer dollars in and out of the country.

This underscores the Marshall Islands' dependence on foreign aid. 

In addition, the country is vulnerable to natural disasters, as well as sea level rise, which is associated with climate change. The adoption of cryptocurrencies as legal tender could pose a threat to both the country's financial integrity and its relationships with American banks. The result could be a cutoff in foreign aid the island nation needs, the IMF says.

Major financial regulators are still concerned about the possibility of cryptocurrencies being used for purposes such as criminal activity or money laundering. This could give the US bank reason to reconsider its relationship with the Marshall Islands. 

According to the BBC: "All the IMF is doing is describing the situation that will happen if the Marshall Islands continues to proceed with its plan. A large correspondent bank will be extremely concerned."

According to bbc.co.uk