The International Monetary Fund (IMF) has cautioned the Republic of the Marshall Islands (RMI) about the dangers of adopting a cryptocurrency as a second legal tender.
This was made known in an official press release that was published on September 10.
The U.S.-based agency supported by the United Nations directed its sentiments to the government of the Republic of the Marshall Islands, claiming that the introduction of digital currency as a sanctioned form of legal tender would pose risks to the country’s financial stability, as well as relations with foreign banks.
By embracing digital currency as a second official currency after the U.S. dollar, the Bank of Marshall Islands (BOMI) — the only local commercial bank of the country — would raise the risk of losing “the last U.S. dollar correspondent banking relationship (CBR)” as a result of intensified diligence by banks in the U.S., the statement conveyed.
Since the Marshall Islands are “highly dependent on receiving and spending U.S. grants,” the IMF also said that the loss of significant banking relationships could put a huge wrench into the country’s economy.
In addition, the IMF believes that the expenses of adopting cryptocurrency, such as the development and implementation of anti-money laundering (AML) and counter financing of terrorism (CFT) policies, are “considerably smaller” than any possible financial gains:
“The potential benefits from revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks. In the absence of adequate measures to mitigate them, the authorities should seriously reconsider the issuance of the digital currency as legal tender.”
The IMF appealed to Marshalese officials to think twice about issuing a digital currency until the government is able to offer and put in place “strong policy frameworks” with regards to economic, reputational, AML/CFT, and governance risks.
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