The cryptocurrency community is full of entrepreneurial people who think they can change the world. From challenging financial and tech giants to attempting to establish sovereign micro-nations, nothing is beyond their reach. A recent example shows they can even successfully convince countries to issue their own cryptocurrency.
How a Coin Is Born
The team behind Neema, an Israel-based remittances startup, has given interviews to various Israeli financial press about their involvement in the creation of the upcoming Marshall Islands cryptocurrency, Sovereign (SOV).
CEO Barak Ben Ezer explained the problem with other cryptocurrencies that he thinks only a nation can solve: “These coins are unregulated and subject to capital gains tax as if they were stocks, and it created a situation in which these currencies could not be used in everyday affairs. When I tried to understand why it was stuck, I read a circular by the IRS, where it was written that the definition of money is ‘the legal tender of a sovereign state’, so I said that if that’s what they say, let’s find a state and create a digital currency together with it, which is its legal tender.”
As to why he approached the specific country that he did, the Marshall Islands, the CEO said: “I was looking for a country that would be open to the idea of adopting a cryptocurrency as legal tender. I ruled out countries like Sweden and went to the smallest countries in the world. The smaller the country, the easier it will be for it to adopt such a currency. I added another parameter – a country that does not have its own currency. That’s how I got to the Marshall Islands.”
Costs and Benefits
“We are taking all the expenses of this thing on us, which will cost us tens of millions of dollars,” explained Ben Ezer. “We need to finish developing the technology and implement the payment system across the islands, and each and every one of the businesses here will have the ability to accept payments in cryptocurrencies.”
As for where the money is going, he elaborated: “50 percent of the money will go to the State Budget Support Fund, 20 percent to the fund that handles the victims of the nuclear tests that the US conducted in the country in the 1950s and 1960s. Another 20% will be distributed directly to citizens – an office will be opened for each person to come with an ID and receive his allowance equally, and the last 10% will go to a fund that supports the use of green energy. The Marshall Islands suffers a lot from global warming because of its unique geography, and they want to transfer all their islands to solar energy. For us this is an opportunity to fulfil all our dreams of how we want a society and a state to be operating.”
Not Enough for a Tax Haven
Neema’s Israeli lawyers even helped with the drafting of the needed legislation. Attorney Yuval Shalhevet said: “The Marshall Islands central bank was involved in the process, but since they do not have a currency (they use the USD), the Marshall Islands rulers never dealt with monetary regulation. They did not really have currency laws, we helped write the law.”
“The Marshall Islands’ greatest concern was to [not] become a haven for money laundering,” Shalhevet explained. “The state did not want to turn into a shelter for money launderers. They were afraid of lawsuits against them, so we built up barriers. Once someone converts the coin to fiat money, there will be a face recognition process. This process does not exist at the initial offering stage, as is customary in ICOs. The technique will be using face detection technology to make sure that it is the right person who draws the money.”
Asked about the risk of creating a tax shelter, the lawyer answered that: “The tax authorities are the first to deal with the crypto coins, and if they think there is a problem with a tax shelter, they can fix it right away. Now the intention is to raise $30 million, that’s not exactly the amount of a tax shelter. Additionally, the document defines exactly how much the coins will grow every year, and there is also a set quantity for the pre-sale – so it’s not really a tax haven.”