International Monetary Fund (IMF) Urges Reforms to Shield Marshall Islands From Crypto Economy
The IMF believes that a nation with ‘capacity constraints’ and lacking a central bank should not enter the crypto economy. Annual talks between the Republic of the Marshall Islands (RMI) and the IMF have been completed.
The financial agency concluded that this year, the nation is anticipated to witness growth in its gross domestic product (GDP). This will aid in recovery from the Covid-19 impact as well as the fishing industry’s shrinking. Nevertheless, issues such as decentralized autonomous organizations (DAOs) and climate change are still a threat.
Crypto Economy Threatens Republic of Marshall Islands Post-Covid Recovery
The Republic of the Marshall Islands comprises more than 1000 islands spread across the Central Pacific area. Its average elevation is six feet above sea level, and its population is nearly 56000. Its 2022 GDP was 261 million dollars, meaning that selling one fishing boat resulted in a GDP drop of 4.5 percent that year.
The IMF revealed that before a new Compact of Free Association with the U.S is implemented in 2024, RMI requires fiscal reforms. Besides, the financial agency announced that fintech initiatives threaten RMI’s financial integrity.
International Monetary Fund Question Ratification of Legislation Welcoming Decentralized Autonomous Organizations (DAOs)
The Republic of the Marshall Islands ratified legislation acknowledging decentralized autonomous organizations as legal entities. Besides, their incorporation as limited liability organizations was permitted.
The two moves resulted in IMF’s unease. According to the financial agency, ratifying the DAO Act and registering DAOs are quite concerning due to the capacity limitations. Besides, there are questions concerning the authorities’ understanding of adequate regulation and supervision of the initiatives.
IMF Orders Marshall Islands Halt Registration of DAOs
The International Monetary Fund instructed RMI to enforce a halt on the registration of DAOs. Besides, it also advised the nation first to establish a monetary authority. It remains unclear if any DAOs have been registered in the RMI.
Concerns regarding the nation’s fintech and ‘offshore sector’ associated with Anti-Money Laundering and Counter-Terrorist Finance raise the risk of losing the last U.S dollar correspondent account.
Unprepared RMI Urged to Revoke Central Bank Digital Currency
Also referred to as derisking, the loss of corresponding accounts detaches a nation from the global economy. Besides, from a social justice viewpoint, the nation is considered controversial.
RMI was also advised to revoke its central bank digital currency (CBDC), the SOV. Despite the agency’s inclination towards CBDCs, it emphasized the need for RMI to withdraw from its CBDC project since the nation is not ready for its implementation. The SOV has not been launched yet.
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