On 3 December, the international media was littered with reports that the British Virgin Islands is about to have a digital currency which would operate one to one against the currently used United States dollar.
The announcement was circulated worldwide in a press release that was issued by LIFElabs.io, a company that Premier and Minister of Finance Hon. Andrew Fahie announced on 18 April that Government had formed a partnership with.
In the said release the company referenced the Digital Economy symposium that was being held in the Territory on Tuesday 3 December and stated that it intended to unveil details about the currency at the event.
In noting the currency aspects, the press release said, “Since 1959, BVI has relied on the United States Dollar as its national currency for business and consumption. In partnership with LIFElabs.io, the government is looking to implement a central digital currency powered by LIFEtoken pegged 1:1 against the United States Dollar for use within the territory. It is expected that this transition will reduce transactional fees, increase transaction speed, and be accessible to BV Islanders and tourists alike.”
Premier Fahie was quoted in the press release lauding the work of LIFElabs and the concept of the currency. The release said, “A major focus of the one-day symposium is to raise awareness and work with BVI thought-leaders. Premier Andrew Fahie stated: “The importance of blockchain technology and the significant benefits it offers the BVI are paramount to the Territory. We welcome this innovation with open arms. Our partner, LIFElabs, has demonstrated with their proven track record that their ideology is not just mere words, and we look forward to continuing our partnership with them on the rollout of BVI~LIFE, our digital currency.”
No Official Mention of “Second Currency”
Some of the articles that arose from the press release seemed to pit the new digital currency against the dollar. For instance Ledger Insights, a site that publishes global news and features about business and enterprise blockchain in its article said, “The main feature of BVI~LIFE is that it will allow the British Virgin Islands to transition from using the US Dollar for monetary transactions and have an independent digital currency.”
However, in the Premier’s remarks at the opening of the symposium Hon. Fahie did not make any use of the term second currency or used related terminology. According to his published speech the Premier said, “It is important for me to let you know that BVI has been tapped with a number of proposals that could potentially position the BVI as a Financial Technology hub. FinTech is currently disrupting sectors with services such as mobile payments, money transfers, fundraising, and KYC compliance. This is the new emerging technology that helps consumers or financial institutions deliver services in newer, faster ways than traditionally available.”
“We also have blockchain technology that looks at our digital currency, which offers significant benefits to the BVI, which are paramount to the Territory. We welcome this innovative technological advancement with open arms,” Hon. Fahie added.
Back in April the Premier and Minister of Finance explained that the partnership with the company, LIFElabs.io, was for the purposes of providing Rapid Cash Response in the event of an emergency, and also creating an alternative digital currency payment method for facilitating ongoing financial transactions across the network of islands.”
“The LIFElabs.io implementation for the BVI will allow island residents to download the LIFEwallet® app on either Apple iOS or Google Android mobile devices, accessing an account that can have funds deposited into it whenever a disaster strikes. For users who do not currently have smart mobile devices LIFE will provision for digital currencies to be sent and received via SMS. The wallet app can also be used for peer-to-peer (P2P) transactions, or in daily commerce, purchasing essential goods and services from local businesses,” the announcement in April stated.
Should the Territory Pay Heed to International Concerns?
In its coverage of the digital currency Bloomberg, this week, likened the Territory’s announcement to that of the Republic of Marshall Islands (RMI). The article said, “In creating its own coin, it is following countries such as the Marshall Islands.”
This reference to the Marshall Islands is interesting considering that similar to the British Virgin Islands that country uses the United States Dollar as its currency. However, upon announcement of its cryptocurrency the RMI attracted a warning from the International Monetary Fund (IMF).
In 2018 when the Republic of the Marshall Islands announced that it intended to launch a national cryptocurrency (“SOVEREIGN” or “SOV”), the IMF in a Selected Issues paper that was completed on 10 August, 2018 warned, “The issuance of the SOV would put the RMI into largely uncharted territory for financial regulation and monetary policy. The SOV Act was passed at a time when there is little certainty regarding the best regulatory approach to virtual currencies/crypto assets.”
IMF Raises concern for Marshall Islands Move
The IMF also raised concern that the cryptocurrency was proposed to be a second currency and mentioned that this could result in a dual currency system. “The SOV is also intended to be the RMI’s second legal tender, thereby raising problems of macroeconomic management under a dual currency system. The law declares the SOV as legal tender of the RMI for all debts, public charges, taxes and dues. It also amends the General Fiscal Matters Act (which identifies the U.S. dollar as the RMI’s legal tender) with the addition of a reference to the SOV as legal tender of the RMI alongside the U.S. dollar,” the IMF report said.
Further, the IMF said, “It is worth noting that, in the case of the RMI, the designation of the U.S. dollar as the country’s legal tender is also set in an international agreement, more specifically in the Compact of Free Association. Section 251 provides that, should the government of the RMI act to institute another currency, the terms of an appropriate currency transitional period shall be as agreed with the U.S. Government. At the time of drafting, the U.S. Government had not formally taken a position on the legal implications of the SOV Act under the Compact,” the IMF further warned.
Perplexities and questions need transparent responses
Ledgerinsights.com raised quite a few questions, including: “Another key feature of BVI~LIFE will be the “Rapid Cash Response” fund. The British Virgin Islands have experienced various natural disasters in the past, such as Hurricane Irma. BVI~LIFE through the “Rapid Cash Response” fund will help citizens access cash quickly in times of need.
“However, natural disasters often impact cellular access, so we asked how the solution addresses this. The spokesperson responded that LIFElabs are building partnerships with telecoms providers to operate as a disaster recovery solution. It’s currently advising /consulting with them about putting infrastructures in place and how LIFELabs can help BVI brace itself for future disasters.
“A third service that LIFElabs plans to offer is the Platform-as-a-Service (PaaS) model of BVI~LIFE to allow businesses to use blockchain solutions such as merchant services, peer to peer transactions, and cross-border payments.
“According to CoinMarketCap LIFElabs has a LIFE token which currently has a market capitalization of less than $2 million.” “Last month, Russian firm Universa spoke at a Tunisian conference about the potential for a Tunisian digital currency. Based on a Tass newswire, plans for an e-dinar were widely mis-reported as a Central Bank Digital Currency, including by Ledger Insights. Despite retweeting other articles describing it as a CBDC, Universa backtracked after the Tunisian Central Bank refuted the claims.”
According to Tokenpost, on Wednesday, the Bank of Japan Governor Haruhiko Kuroda said that users of Global Stable Coins (GCSs) cannot appreciate their benefits “unless various challenges and risks related to money-laundering, cyber security, data protection and consumer and investor protection are properly addressed.”
The BVI government has so far not disclosed the costs, agreements, guarantees and terms involved in the partnership.