As cryptocurrencies become increasingly mainstream, a small island nation will launch the first digital legal tender. Lawmakers hope the residents will use the SOV for everything from paying taxes to buying groceries.
Image: picture-alliance/AP Photo/U.S. Army
Advertisement
The Marshall Islands will launch the world's first legal tender cryptocurrency after a law passed by parliament earlier this week went unopposed by an official council.
The nuclear-ravaged nation has partnered with Israeli company Neema to issue 24 million units of the Sovereign (SOV) digital currency. It will cap the number to prevent inflation.
The move follows Venezuela's launch of the Petro cryptocurrency in February. Investors supposedly shelled out $735 million (€600 million) for the oil-backed, sanction-skirting currency, according to President Nicolas Maduro.
Unlike the Petro, the SOV will be recognized in law as legal tender, holding equal status as the US dollar, which is the Pacific island nation's current currency.
"This is a historic moment for our people, finally issuing and using our own currency, alongside the USD," said President Hilda Heine in a statement. "It is another step of manifesting our national liberty."
Lawmakers hope the country's 60,000 residents will use the SOV for everything from paying taxes to buying groceries.
Half of the 24 million coins will go to the government and the other half to the Israeli financial technology startup helping with the plans.
Six million SOVs will be made available to international investors, with the money raised used to help pay the budget, invest in anti-global-warming projects, and supporting people still affected by US nuclear testing. Residents will receive 2.4 million SOVs.
David Paul, minister-in-assistance to the president of the Marshall Islands, said the government had not yet determined a launch date for the initial coin offering, a popular, but controversial, way to launch a cryptocurrency, but that it would begin soon.
Senators passed the law on Monday and will launch the currency "soon"Image: picture-alliance/AP Photo/H. Hosia
No anonymity
Unlike most popular cryptocurrencies, such as Bitcoin or Ethereum, the SOV will require currency holders to identify themselves, hopefully avoiding the problems of regulating an anonymous currency.
Neema Chief Executive Barak Ben-Ezer said the coins represented a new era for cryptocurrency, with banks and regulators failing to recognize previous currencies.
"SOV is about getting rid of the excuses" for not shifting to digital assets, he said in a statement.
The booming cryptocurrency has a cryptic backstory and a perplexing modus operandi. Following a year of particularly tumultuous growth, DW asks where Bitcoin will go next. Can it sustain its incredible ascent?
Image: picture-alliance/dpa/J. Kalaene
Good time to start a currency
Introduced in 2009, Bitcoin was the world's first decentralized digital currency. It quickly gained traction amid lingering uncertainty in the wake of financial crisis. Designed to be as rare as gold, Bitcoin was created to have a maximum of 21 million "coins." Initially worth just a fraction of a cent, by February 2011 the currency had gained parity with the US dollar, then it really took off.
Image: picture-alliance/dpa/J. Kalaene
An anonymous founder
The name Satoshi Nakamoto is synonymous with Bitcoin. It is said to be the alias for an unknown IT whizz who invented the cryptocurrency. But despite claiming to be a 30-something Japanese national, it is generally thought that several computer science experts created the technology behind the digital coin. One rumor even suggested that Tesla chief Elon Musk is the real Satoshi, which he denied.
Image: Reuters/AAP/B. Macmahon
So no coins then?
Instead of being printed like dollars and euros, each Bitcoin is created on a global network of computers and verified by the system rather than a bank. There are no transaction fees. The smallest amount you can buy is a "Satoshi" or one-hundred-millionth of a Bitcoin. Purchases can be made anonymously and even at digital currency ATMs. When you buy Bitcoin, it is often stored in a digital wallet.
Image: DW/M. Sevcenko
Complex puzzles
To ensure that not too much Bitcoin comes into circulation, a process called mining was created where blocks of transactions could only be processed once a difficult math problem was solved by geeks. The puzzles are becoming so complex that bigger and bigger computers are being utilized to decipher them. That's led to concerns about the amount of electricity used to handle Bitcoin transactions.
Image: Getty Images/AFP/M. Zmeyev
Are Bitcoin fortunes legit?
Due to its anonymous nature, Bitcoin's success is likely being fueled by organized crime, including money laundering and the purchase of illegal goods. The currency is also being targeted by cybercriminals. A recent hack blamed on North Korea forced a South Korean digital currency exchange into bankruptcy. Reports suggest the "Islamic State" armed group used Bitcoin to receive funds to buy arms.
Image: picture-alliance/Zuma Press/M. Dairieh
Bitcoin leads, others follow
Bitcoin is the largest of all the cryptocurrencies and its incredible rise has spawned many imitators. Other large digital cash creators include Ethereum, Zcash, Bitcoin Cash, Ripple and Litecoin. As of November 2017, their number had swelled to 1,324. Hundreds of others have attempted and failed to launch their own digital coins. The market is now coming under increasing scrutiny by regulators.
Image: picture-alliance/NurPhoto/J. Arriens
Watch it skyrocket
2017 was a stratospheric year for Bitcoin. Worth close to $1,000 in January, some twelve months later it had scaled to an all-time high of $19,784. Despite much skepticism, the currency started to see serious interest from institutional investors. Two exchanges began Bitcoin futures trading, allowing speculators to punt on the incredible volatility in the value of the cryptocurrency.
Image: Reuters/D. Ruvic
Warnings abound
From central banks to respected investors, almost the entire financial establishment warned of a massive Bitcoin bubble, which they said can only end in disaster for holders of the digital currency. Among them was Nobel prize-winning economist Joseph Stiglitz who said Bitcoin "ought to be outlawed." Jamie Dimon, the CEO of JPMorgan Chase labeled those who buy the currency "stupid."
Image: World Economic Forum/Benedikt von Loebell
The shape of things to come?
Just before Christmas 2017, Bitcoin saw a dramatic rally, topping out at nearly $20,000 before losing a third of its value in just five days. More intense volatility followed early in the New Year, only to be reversed when it plummeted by almost half. Are we in for an even bigger rollercoaster ride if Wall Street adopts Bitcoin?
Image: Imago/imagebroker/M. Weber
9 images1 | 9
Unappealing for international investors
Jehan Chu, the Hong Kong-based co-founder of blockchain platform Kenetic, told the Reuters news agency it was an amazing move by the Marshall Islands and was the way of the future.
"Physical currency is going by the wayside as an antiquated, obsolete form of transacting," he said.
But Chu said the currency was unlikely to hold much appeal for international investors or be particularly valuable outside the Marshall Islands.
Several governments, including China, Estonia, and Iran, have discussed plans for their own digital currency.
What happens when coral gets stressed? Global warming and environmental changes can cause corals to lose their color, and hinder their ability to feed and reproduce. Scientists and policy makers are sounding alarm bells.
Image: imago/OceanPhoto
Trouble in paradise
Some 2,500 scientists, policymakers and managers came together in Honolulu in June 2016 for the world's largest summit dedicated to the future of coral reefs. With coral reefs threatened by global warming, participants at the 13th International Coral Reef Symposium are calling for a joint rescue effort.
Image: picture alliance/WILDLIFE
World is watching
The event gathered guests from 97 countries, including the presidents of Palau, Micronesia, and the Marshall Islands. Coral reefs are a key source of income in those countries, mostly through tourism.
Image: picture alliance/WILDLIFE
Too warm for comfort
The Pacific nations are worried about the future of their tourist hotspots, as coral reefs face so-called "bleaching" due to rising sea temperatures. "If our coral reefs are further degraded, then our reef-dependent communities will suffer and be displaced," leaders of Palau, Micronesia, and the Marshall Islands said in an open letter.
Image: imago/OceanPhoto
Corals in crisis
Bleaching happens when coral is stressed by hot ocean waters or other changes in the environment. In response, corals may release tiny symbiotic algae which drains them of color. More importantly, bleaching affects their ability to feed and reproduce.
Image: Imago
Pale as death
Severe or prolonged bleaching might kill off corals entirely. Scientists have detected bleached coral in the past two years in oceans around the world. They expect the process to continue thought 2016.
Image: imago/blickwinkel
Giant from Down Under
The 2,300-kilometer-long (1,429-mile-long) Great Barrier Reef is the world's largest coral reef system and its largest living structure. It is also among Australia's main tourist attractions, generating around $3.9 billion (3.5 billion euros) annually.
Image: Imago/ZUMA Press
Tough times for the Great Barrier Reef
Almost one-half of the coral in the reef's northern third have died in the past three months [in 2016], according to James Cook University professor Terry Hughes. The most affected area is remote and unpolluted, with very little fishing and no coastal development. "That's an absolute catastrophe," Hughes said. "There's nowhere to hide from climate change."
Image: Dorothea Bender-Champ for ARC Centre of Excellence for Coral Reef Studies
Fighting for hope
Despite the bad news, scientists claim the problems can be managed with proper funding and political backing. "We are not ready to write the obituary for coral reefs," Professor Hughes said. The scientific community at the conference pledged to work with leaders across the world in order to "curb the continued loss of coral reefs."