By Daniel Popa, Anchor CEO and Founder
The Republic of the Marshall Islands has used the US dollar as its main currency since becoming an independent democratic nation in 1979. With the US dollar depreciating in value and losing more than 55% of its purchasing power in the last 25 years https://theanchor.io/wp-content/uploads/2019/10/Anchor-Official-Whitepaper-5-3-1.pdf , combined with market fluctuations and unsustainable inflation rates, the Marshall Islands announced in September 2019 that they will be progressing to issue a new, official sovereign cryptocurrency, leveraging the decentralized power of blockchain technology.
While this development was signed into law in March of 2019, its significance has resurfaced in recent weeks as it has been made clear that banks and credit card companies operating on the islands will need to start accepting the new digital currency. While the US dollar is likely to still be accepted as tender on the islands, the ratification of this currency as official legal tender is a transformational development for the mainstream adoption of alternative currencies and blockchain technology.
The Honorable David Paul, Minister In-Assistance to the President and Environment of the Marshall Islands, stated in a recent essay that the main reason for their decision to choose a currency based on blockchain technology over a traditional fiat currency was based on the physical decentralization of the islands themselves. Transporting ATMs to a group of islands in the middle of the Pacific Ocean is no easy task; the world bank states that there are less than 5 ATMs across all 1,000 islands https://data.worldbank.org/indicator/FB.ATM.TOTL.P5?locations=MH and as such there are frequent instances of Marshall Islanders being forced to travel just to withdraw their currency.
In recent years, Marshall Islanders have utilised remittance services to reduce their need to travel to withdraw currency from ATMs, however these services come with their own downsides; some islanders end up paying fees of up to 10% per transaction. Blockchain technology, however, allows transactions to be made quickly, easily, and most importantly at a much lower cost than typical remittance services. Transactions are also notably secure; blockchain technology allows for the immutable recording of each transaction through a decentralized ledger network and affords much greater transactional transparency across all relevant parties.
The government of the Marshall Islands has devised a solution that protects their proposed cryptocurrency from falling into criminal hands. This is to allay concerns that have been raised by the media surrounding some digital currencies and the potential for their use or harbouring by terrorists, criminals, and money launderers. Every individual or company that uses the Marshall Islands sovereign must be approved by a certified verifier which could be a bank, post office, or government entity utilizing Know Your Customer (KYC) processes to ensure there are no anonymity loopholes.
While the Marshall Islands guarantee the individual’s right to a reasonable expectation of privacy, they are also working with regulatory bodies to ensure the full compliance of their new currency. This will also allow for increased interconnectivity between the Marshall Islands and the international economy, as the islands were formerly a predominantly cash based economy. Their adoption of such a currency has the potential to increase foreign investment in the islands.
In tackling the volatility typically associated with cryptocurrencies, the government of the Marshall Islands chose to create a fixed money supply with a fixed growth rate. This fixed growth rate also counteracts inflationary concerns that usually face typical fiat currencies. Under the proposed framework, each year additional amounts of this proposed currency will be automatically transmitted to those that hold this proposed currency. The decentralized entities that secure the network will also receive payment in this form. The government cannot engage in either expansionary or contractionary monetary policy by increasing or decreasing the money supply. The government of the Marshall Islands cannot manipulate the value of its currency by printing more money. The blockchain network that the proposed currency is based on is the only required infrastructure, and as such the Marshall Islands will not require a central bank to manage the digital currency.
Many cryptocurrencies developed in recent years have been pegged to fiat currencies. With increasing fluctuations in forex markets due to political instability across the world, many fiat currencies and cryptocurrencies pegged to fiat have been proven unstable and are subject to the same purchasing power depreciation. This has led to the creation of the world’s first algorithmic based stablecoin that is pegged to global economic growth — the Anchor stablecoin (ANCT). Providing an alternative to fiat-pegged stablecoins, Anchor aims to remain stable regardless of a single fiat currency’s strength, market fluctuations, or economic recessions.
As the first to market a new category of digital global currencies, Anchor is a two-token, algorithmic stablecoin pegged to global economic growth via the Monetary Measurement Unit (MMU), a non-flationary financial index, which reflects the sustainable growth of the global economy. The MMU is a non-flationary financial index created by an algorithm that tracks a series of macroeconomic indicators to provide the most accurate, available measure of real value that exists in the world today.
Contrary to the downward value trend of most major fiat currencies due to inflation, the global economy, on the other hand, has a sustainable and predictable growth trend with global GDP steadily increasing over time. Data from the World Bank shows that since 1960, global GDP has expanded from $1.3trn to $80.7trn. World economic growth has increased at an average rate of 2.5% annually for the past 25 years despite market fluctuations within each country, thus providing a reliable measure for value.
Anchor’s next-generation tokenomics incorporates an elastic supply rule that adjusts the quantity of coin supply proportionately to changes in Anchor’s market value with a two-token, burn-mint model that adheres to naturally occurring Contraction and Expansion Phases. Anchor Tokens (ANCT) serve as the main currency/payment tokens, while Dock Tokens (DOCT) serve as the utility tokens that ensure ANCT remains pegged to the MMU regardless of external market fluctuations.
Beyond trading, Anchor’s stablecoin could be leveraged to significantly reduce fees and transaction times when sending remittances or making international payments via wire transfer or credit card. The unbanked can join the Anchor Economy simply by downloading the Anchor Wallet to a mobile phone, which enables funds to be stored, sent, and received without value lost due to transaction fees. Furthermore, Anchor’s financial index, the MMU, has the potential to become a new financial standard and an ideal value peg for countries issuing their own sovereign cryptocurrencies, such as the Marshall Islands.
The Anchor stablecoin offers a high potential for the sustained growth of a nation’s currency, such as that proposed by the Marshall Islands. This currency technology can be adopted by economies such as the Marshall Islands and potentially be used as their sovereign digital coin under their own sovereign label. Anchor could be the ideal solution that the Marshall Islands is seeking in a digital currency offering long-term price stability and steady appreciation over time, outpacing inflation and hedging daily currency fluctuations.