marshall islands

Jun 10 2021

IMF plans to meet with El Salvador’s president, potentially discussing move to adopt Bitcoin

The International Monetary Fund has said El Salvador’s recent decision to make Bitcoin legal tender in the country may raise legal and financial concerns.

In a Thursday press briefing from the International Monetary Fund, or IMF, spokesperson Gerry Rice said the group was already in discussions with lawmakers in El Salvador over a loan to support the country’s economy, having approved emergency funds related to the pandemic last year. However, Rice said an IMF team would be meeting with President Nayib Bukele today and implied crypto would be a likely topic for discussion.

“Adoption of Bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis,” said Rice. “We are following developments closely, and we’ll continue our consultations with the authorities.”

Spokespeople for the IMF have often voiced concerns about countries adopting digital currency. In March, the group issued a similar warning against the Marshall Islands’ recognizing its digital sovereign currency, called SOV, as legal tender, as it may pose similar legal and financial risks. In that case, a spokesman said the islands’ local economy had been strained by the economic fallout of the pandemic and likely wouldn’t be corrected with the SOV.

In the case of El Salvador, the time between the introduction of ideas and action is seemingly short. President Bukele first announced he would propose a bill making Bitcoin (BTC) legal tender in El Salvador at a pre-recorded video message at the Bitcoin 2021 conference this weekend. The legislation passed with a supermajority in the nation’s Legislative Assembly yesterday.

Though the country is still seeking support from the IMF related to the pandemic this year, it has already begun to consider the energy needs of Bitcoin miners. Bukele said he would be instructing state-owned electrical company LaGeo, to make certain facilities available to miners to utilize geothermal power from the country’s volcanoes — El Salvador currently operates the two geothermal plants in Ahuachapán and Berlín.

“Crypto assets can pose significant risks,” said Rice. “Effective regulatory measures are very important when dealing with them.”

IMF plans to meet with El Salvador’s president, potentially discussing move to adopt Bitcoin

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Mar 24 2021

Marshall Islands digital currency would ‘raise risks,’ says IMF

A representative for the International Monetary Fund has said the Marshall Islands’ digital sovereign currency would currently pose a risk to the islands’ financial stability.

Following a March consultation, International Monetary Fund, or IMF, representative Yong Sarah Zhou said the issuance of the Marshall Islands’ digital sovereign currency, called SOV, as legal tender would “raise risks to macroeconomic and financial stability as well as financial integrity” of the islands. According to Zhou, the measures the Republic of the Marshall Islands, or RMI, took to contain COVID-19 may have been “swift and strong,” but also strained the local economy.

“The issuance of the SOV could jeopardize the RMI’s last USD corresponding banking relationship,” said Zhou. “This combined with anti-money laundering and combatting the financing of terrorism risks (including those related to the SOV) could disrupt external aid and other important financial flows, resulting in a significant drag on the economy.”

She added that the “cautious approach” towards the SOV already in place was warranted, given that the “potential cost of the SOV issuance will likely outweigh the expected benefits.” According to the IMF representative, the RMI’s gross domestic product fell more than 3% in FY2020 and is expected to decline another 1.5% this fiscal year with a possible recovery of the local economy in 2022.

“The RMI’s legal, regulatory, and institutional framework is not yet ready to accommodate the SOV issuance and manage associated risks.”

Government officials first announced the RMI would be exploring the creation of a digital currency in 2018, one that could be used as legal tender alongside the U.S. dollar — though the Marshall Islands are a sovereign state, they are also an associated state with the U.S. In June, a crypto advisor to the islands said that the RMI was conducting an 18-month test phase for “preSOV,” a token which can later be converted into SOV.

Central bank digital currencies have had some success in areas spread across multiple islands. For example, the Bahamas launched its Sand Dollar digital currency in October, aimed at driving greater financial inclusion within the archipelago nation of more than 700 islands. There are more than 58,000 people in the RMI spread across 29 atolls and 5 islands, 24 of which are inhabited.

Marshall Islands digital currency would \’raise risks,\’ says IMF

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