Hilda Heine – President of the Marshall Islands – is currently facing a vote of no confidence after she announced plans to create a national digital currency. The proposed digital currency was set to be called the Sovereign – after the country’s desire to be free from the United States – and it was due to be launched before the end of the year. It would be used alongside the US dollar as a legitimate currency, but the International Monetary Fund (IMF) had already warned the Marshall Islands against doing this back in September.
Trouble in the Ranks
Heine’s administration has been angering senators for quite some time now. Earlier this year, a group from Rongelap Atoll wanted to create a special investor haven – similar to a tax haven like the British Virgin Islands – but the Heine administration blocked the proposal saying it violated a number of international laws. The group that the Heine administration angered with this move is the same group behind the latest vote of no confidence.
IMF Playing the Mediator
When Heine announced the plans for a national digital currency – around the same time Nicolas Maduro announced the Petro – the IMF instantly stepped in and offered some friendly advice. However, the administration ignored the gentle warnings and then proceeded to ignore the IMF’s final warnings in September. In its final set of warnings, the IMF stated that the US would renege its arrangement with the Marshall Islands that allows the country to use the US dollar as a currency. This would make issuing aid and economic relief packages much harder, and would leave the country effectively on its own.
Seeking Independence
The United States has been protective over the Marshall Islands and very much sees the plethora of islands and atolls as a part of the US. The US liberated the Marshall Islands from the Japanese in the second world war, and has since provided an abundance of aid, support, and economic relief. Biting the hand that literally feeds it, the country is now seeking total freedom from the US, and its final step is to ditch the US dollar and replace it with its own currency. While this is fine for the most part, the fact that it’s trying to use a digital currency has a lot of people concerned.
Fears Over Illicit Money Flowing in
Opposition in the Marshallese government fear that the Sovereign will quickly become like the Petro – used to circumvent sanctions and a safe passage for illicit money. Maduro originally created the Petro to circumvent US and EU sanctions, and officials are worrying that Heine will follow the same route. While Heine has yet to outline exactly how the digital currency will work, in order to survive the vote of no confidence, she needs to hurry up.
Digital currencies are still in their infancy – that much we do know – so taking one up and dropping the national fiat is still unheard of, especially in an economy that isn’t in hyperinflation. There is a good chance the vote of no confidence will pass and Heine’s digital currency will fade into a distant memory.
