IMF in a report advised the Marshall Islands against the introduction of cryptocurrency as a legal tender in the country because of the possible adverse effect on its economy.
Cryptocurrency As Legal Tender In Marshall Islands
Marshall Islands, an island country in the Central Pacific planned to introduce a national cryptocurrency as legal tender in the country alongside the United States Dollar in February 2018.
Towards the introduction and adoption of the national cryptocurrency, the country had consultations with the Breton Wood Financial Institutes’ IMF, International Monetary Fund.
The observation of the IMF on the cryptocurrency adoption was released in a report on 10th September. The report advises the country against threading the path of cryptocurrency adoption.
The IMF noted that the economy of the country is highly dependent on external aid because of the frequent climate change and natural disaster in the country.
Introducing cryptocurrencies will put the only domestic bank on the fringe of losing its U.S. dollar correspondent banking relationship (CBR) with a U.S.-based bank, because of the eventual tightening due to the diligence of financial institutions in the US.
It was further noted that its introduction without an adequate comprehensive anti-money laundering (AML) measures could lead to the United States severing ties with the country. This will also bounce to the cutting of external aid to the country which will lead to a further decline of the country’s economy.
Global Cryptocurrency Adoption
The adoption of cryptocurrency and its underlying technology has become the recent trend among countries facing high inflation and economic hardship as they plan to use it to revamp their economy.
This has been adopted by Venezuela, Thailand in the process, Iran still planning, and speculations on cryptocurrency being a national currency in Turkey.
Notably, the cryptocurrency project Petro, as adopted in Venezuela to revamp its economy was branded to fail from the beginning by IMF. Since the official introduction of Petro in Venezuela in August, the cryptocurrency project has been unable to serve the reason of which it was created.
Recently, the IMF expressed wariness of the nascent cryptocurrency industry threatening the existence of fiat currency. This led the IMF Chief, Christine Lagarde, to state that central banks should adopt the desirable features of cryptocurrencies to compete with the crypto industry.
The fear of cryptocurrency replacing the country’s local currency has made China ban cryptocurrency in the country. But will cryptocurrency eventually eliminate fiat currency or it will exist side by side? That’s a question that unfolding events in the cryptocurrency world will answer with time.