MAJURO, Marshall Islands — The tiny Marshall Islands is creating its own digital currency in order to raise some hard cash to pay bills and boost the economy.
The Pacific island nation said it became the first country in the world to recognize a cryptocurrency as its legal tender when it passed a law this past week to create the digital “Sovereign,” or SOV. In the nation of 60,000, the cryptocurrency will have equal status with the U.S. dollar as a form of payment.
Venezuela last month became the first country to launch its own cryptocurrency when it launched the virtual Petro, backed by crude oil reserves. The Marshall Islands said the SOV will be different because it will be recognized in law as legal tender, effectively backed by the government.
The Marshall Islands is partnering with Israeli company Neema to launch the SOV. It plans to sell some of the currency to international investors and spend the proceeds.
The Marshall Islands says the SOV will require users to identify themselves, thus avoiding the anonymity that has kept bitcoin and other cryptocurrencies from gaining support from governments.
“This is a historic moment for our people, finally issuing and using our own currency, alongside the USD (U.S. dollar),” President Hilda Heine said in a statement.
“It is another step of manifesting our national liberty.”
The Marshall Islands is closely aligned with the U.S. under a Compact of Free Association and uses the dollar as its currency. Under the compact, the U.S. provides the Marshall Islands with about $70 million each year in assistance. The U.S. runs a military base on Kwajalein Atoll.
Lawmakers passed the cryptocurrency measure Monday following five days of heated debate. It’s unclear when the nation will issue the currency.
Leaders hope the SOV will one day be used by residents for everything from paying taxes to buying groceries.
The law states that the Marshall Islands will issue 24 million SOVs in what it calls an Initial Currency Offering. Half of those will go to the government and half to Neema.