The IMF (International Monetary Fund) has advised against the Republic of the Marshall Islands’ idea to bring in a digital currency as a second legal tender as well as the US dollar.
The Marshall Islands are based in the central Pacific as a remote chain of islands.
The Marshall Islands passed a law on the issue back in February, aiming the planned Sovereign digital currency to raise the local economy and counter the increasing risks of the islands becoming separate from the financial system on a global scale.
After the meetings with officials from the Marshall Islands, the IMF posted a summary on Monday which essentially advised against the move. According to summary, the Marshall Islands economy is apparently now hight dependent on external help since the country is facing natural disasters and climate change issues around the clock.
According to rumours, the only commercial bank in the country is allegedly “at risk of losing its last US dollar correspondent banking relationship with a US based bank.”
The IMF disputed the announcement of digital currency now being used as legal forms of tender saying that it may backfire and if a lack of comprehensive anti-money laundering measures leads to the US bank, thus cutting all ties with the country.
“In the absence of adequate risk mitigating measures, the issuance of a decentralised digital currency as a second legal tender would not only increase macroeconomic and financial integrity risks but elevate the risk of losing the last U.S dollar CBR.”
If that does happen, the IMF argues, “external aid and other flows could be disrupted which would result in a significant drag on the economy.”
The IMF have outlining their case on the social and monetary systems in the Marshall Islands, however, this could pose a window into the thinking of the global monetary organisation on whether digital currencies such as Bitcoin should be boosted to the status of being legal tender in the traditional financial system.
What are your thoughts? Do you believe that crypto should be classed as legal tender? Let us know what you think down in the comments!