Sovereign Cryptocurrencies: 5 Countries 5 Different Perspectives
Central banks around the world have kept an eye on the disruptive technology of cryptocurrencies. On one hand, they’re excited about the distributed ledger innovation that allows the secure transfer of information, without a third party.
Digital currencies, however, are also difficult to regulate, and until now had no links to sovereign currencies. A digital currency issued by central banks would allow national treasuries to make use of all the technological advantages of cryptocurrencies, without relinquishing control to decentralized frameworks such as Bitcoin.
Several countries are experimenting with implementation, however they all have their own reasons for doing so. Let’s explore five nations that have had an interest in setting up “sovereign coins”.
Tunisia is one of the pioneers in digital currency applications with the eDinar. As of 2015, more than 3 million Tunisians were "unbanked", but more than 600,000 used eDinars for day to day transactions.
The Northern African country seriously considered replacing the eDinar with a blockchain-based currency powered by the Monetas platform; however those plans did not go through. In 2016, Flora Paterson, Monetas' spokesperson at the time told the CoinTelegraph: "Our partners presently have no plans to offer Bitcoin related services in connection with the Monetas platform, which is feature rich, and they need to determine which features are appropriate for their market,”.
Riksbank, Sweden’s central bank, hinted at developing its own digital currency (the "e-Krona") before the turn of the decade. Sweden has seen physical cash circulation drop by 40% since 2009 as Swedes turn towards digital payments. In November 2016, Cecilia Skingsley, deputy governor at Riksbank stated: "The less those of us living in Sweden use banknotes and coins, the clearer it becomes that the Riksbank needs to investigate whether we should issue electronic money as a complement to the money we have today."
However, a survey which results have been published in March 2017, taken by Swedish social research firm Sifo revealed that a majority of Swedes aren’t particularly encouraged by the prospect of the e-Krona. A total of 1268 people were polled, aged between 16-79 years during a 3-day period in December, within one month after the Riksbank’s announcement.
The survey, taken on behalf of Swedish digital payments firm Tieto, revealed that half of those polled did not want the e-Krona to be issued at all. One third did not care about the subject at all. This, despite 67% of those polled being aware of bitcoin. Altogether, only a tenth of those polled favoured the e-Krona. The Swedish population gained early access to digital payments and various fintech options and do not seem to see any particular value in a central-bank issued digital currency.
Palestinian officials are planning for the region of Palestine to receive its own digital currency within the next four years. The main motivation for this stems from a perceived lack of monetary sovereignty.
Palestinians have no sovereign currency and use a combination of different currencies, including the euro, the dollar, the Jordanian dinar and the Israeli shekel, to perform daily financial transactions.
Palestinian officials have little control over money supply and inflation. Hence the Palestinian Monetary Authority wants to introduce a bitcoin-like digital currency as the territory's new legal tender, which would be called “the Palestinian Pound,” as stated by Azzam Shawwa, the agency's governor in May 2017.
As early as June 2017, the government of the former Soviet republic Kyrgyzstan announced it intends to issue a national cryptocurrency backed with gold.
Kyrgyzstan is actively seeking private investment for the local gold mining industry. In order to accelerate fund raising, the government opted to issue a cryptocurrency backed with the precious metal. The tokens known as GoldenRocks will be subject to exchange for gold once the field is developed.
Kyrgyzstan’s prime minister Sooronbay Zhaenbekov appointed local state-owned company Trade House Kyrgyzstan (THK) as project manager. The company will use its facilities to generate tokens. Russia-based company Crypt NN will be the head trader for the upcoming ICO (initial coin offering).
In late 2016, Senegal, a country with a large "underbanked" population, planned to introduce eCFA: a cryptocurrency based on its national currency, in collaboration with Banque Regionale de Marches (BRM) and eCurrency Mint Limited.
The development and launch of eCFA was to be overseen by the West African Economic and Monetary Union (WAEMU), which suggested that once ready for commercial roll-out, eCFA will be made available for other African countries including Benin, Burkina Faso, Ivory Coast, Niger, Togo and more.
Since then, there has been a fair amount of contradictory information on technical aspects of eCFA. Today, the state of the project is unclear.
So far, sovereign cryptocurrencies are at a conceptual stage and several central banks were quick to backtrack on project announcements. “First world” nations have been particularly timid in regards to such initiatives. Based on a survey published by the Cambridge Centre for Alternative Finance in September 2017, only one in five central banks said they will be using blockchain technologies by 2019. Forty percent of participants stated such will be in use within a decade.
However, such plans might change if bigger cryptocurrencies such as Bitcoin and Ethereum achieve further adoption within mainstream environments.
This article contains modified and updated excerpts of “National cryptocurrencies: Exploring various initiatives around the world”, Phil Siarri, e-book, nationalcoins.pro, CC BY-NC 4.0
The information provided on this article does not constitute investment advice, financial advice, trading advice or any other sort of advice.
Written By: Phil Siarri
Phil Siarri is an innovation management professional and fintech observer. He has been selected as one of Canada’s top 40 social influencers in finance, innovation and risk by Thomson Reuters, as well as top 50 fintech influencers in Montreal by FinFusion.