Venezuela has been vocal about its intentions to be the first country to actively implement a state-backed cryptocurrency with the recent roll-out of the PetroDollar. In an effort to curb the economic volatility that has plagued Venezuela in recent years — leading to extreme rates of hyperinflation, incredibly difficult living conditions for many, and historically high mass migration — President Maduro seeks to radically reform the current financial system with cryptocurrency.
As we move into the second quarter of the year, we can see he’s not the only one. Here’s a short look at eight countries that are publicly exploring viable use-cases for a proprietary digital asset within their own financial system:
The Eastern-Caribbean Islands
With a tourism-reliant economy facing pressure from the impact of climate change and natural disasters — along with a recent tightening of US banking regulations — the people of the Caribbean are looking for innovative ways to reduce the need to outsource their banking system. The Eastern Caribbean Currency Union is piloting a blockchain project to create a sovereign digital currency for the islands. Such an asset would be a move towards a cashless society while reducing reliance on the US and increasing access to the global market trade.
The Marshall Islands
Efforts by international banks to “de-risk” (to avoid sanctions over fraud and money laundering by pulling out of places like the Marshall Islands) has left the people of the islands virtually bankless and in need of a drastic solution. The Minister of Finance and President Hilda Heine have both embraced the potential of a cryptocurrency as sole legal tender — so that reliance on the US banking system would no longer be necessary. The coinage would be regulated to comply with international standards and will move away from the current paper cash system.
Iran’s current high-price and low-income living situation is triggering regular bouts of civil unrest, as the people look for answers from the government. At the same time, Iran is looking at ways to side-step economic sanctions that are currently being reinstated by the US. The Iranian government believes a state-sponsored cryptocurrency could be the answer. While an indigenous digital currency may not resolve political issues, Iran sees a proprietary asset as a solution to potential financial instability caused by a breakdown of the Iranian nuclear deal.
Turkey has made it clear that they are seriously considering a state-backed cryptocurrency to circumvent the volatility of their native currency. As the relationship between Turkey and the US deteriorates, the country is also looking for financial autonomy from the US. Officials have stated that considerable work would need to be done to regulate a state cryptocurrency — but with so many officials publicly and emphatically endorsing the idea of a state digital asset, a pilot scheme to test a blockchain-based digital asset is likely to be implemented very soon.
International debt, inflation, and a decline in foreign exchange reserves are all forces that are continuously crippling many countries in Africa — and Tunisia for one is looking for a financial solution that will take the country out of this current economic situation. A transaction platform that is being developed would serve as a digital ID for the people, and would also be used for salary transfers, loans, and bill payments. The plan is to ensure that the 10 million strong population of Tunisia could all have access to economic freedom through their smartphones.
As borrowing costs from the US continue to rise for Asian countries and trade tension between the US and China increases — Thailand is exploring solutionsto avoid potential sanctions and repercussions. Wanting to propel itself into a better economic situation by adopting a government-regulated cryptocurrency through the central bank’s “Project Inathon” — Thailand hopes to continue its road to full recovery and to position itself as a leader in financial innovation. The first phase of the project is expected to be completed by early 2019.
A firm advocate and pioneer for cashless banking systems — Sweden is racing ahead in the development of a state-backed cryptocurrency — namely the e-krona. The Swedish government is keen to be a frontrunner in the global exploration of best use-cases for blockchain tech and cryptocurrency — so they have cast the net wide. One of the potential use-cases for this asset is a method by which asylum seekers — with very little alternatives for financial independence — could have a verifiable and secure means of value-transfer.
Despite continued high-profile bans on crypto activity in China and the government not making any official announcements for a state-backed cryptocurrency — many, including several high-profile Chinese banking officials, have hypothesized that a proprietary digital asset is high on the agenda for the Chinese government in the near future. The current rate of blockchain technology development across the country only reinforces those claims. An official announcement on their stance on a government-backed asset seems very likely.
Economic volatility, sanction threats, and “de-risking” strategies, are all realities of the current financial system — and some countries are more vulnerable right now than others. These people need an alternative — and sooner rather than later. In countries where there is more economic stability, the immediate need for an alternative is not as high a priority — but for the people that have to take a boat to another island to use an ATM, or carry around a rucksack full of cash to pay for a cup of coffee — a digital asset option is something to seriously consider.
There are those who believe the trend of state-backed cryptocurrencies being developed will only serve the government, not the people, and that countries will just be moved from one centralized system to another — doing away with the idea of what a decentralized digital currency should be. There are others who believe that a move towards digital assets by different countries would further serve to decentralize the current banking system by undermining the power of global central banks like the Federal Reserve and the European Bank.
Whatever your opinion — it’s clear that the wheels on the “state-backed crypto” train are in motion with no signs of stopping. What comes next? Will it be a case of assigning a completely new and separate category for cryptocurrency that is government-backed and fully-regulated?