By Dionisia Tabureguci
Tuvalu has become the first country in the world to choose Bitcoin Satoshi Vision (BSV) blockchain to help it migrate to a fully digital economy, a move that may see it also adopt Bitcoin SV, the cryptocurrency associated with the BSV blockchain.
The ambitious undertaking, still in very early stages, is expected to digitise all aspects of life in the Polynesian atoll nation, whose population of 11,646 (2019 Census) is concentrated on the main island Funafuti.
“The primary aim of the project is to develop a Tuvalu National Digital Ledger to transform the processes of managing the Tuvalu government and economy in a package designed to suit the unique culture, geography, and society that all Tuvaluans share,” said Simon Kofe, Minister for Justice, Communication and Foreign Affairs for Tuvalu, in an email interview with Islands Business.
“The project will enable a complete transfer from the current existing paper-based records and cash system to a fully digital management and cash system. The scalability of the BSV network means Tuvalu can implement relevant technology rapidly, while allowing for organic growth and development over time. Instead of focusing on just the cryptocurrency aspect, we are focusing on using the actual technology for day-to-day transactions – whether big or small. The value of Bitcoin (BSV) is in its micropayments,” Kofe said.
Not to be confused with Bitcoin, which is worth around US$50,000 per coin (February 2021), Bitcoin SV was created in 2018 via a historic event called a “hard fork”.
This breakaway faction was led by Australian computer scientist Craig Wright, a well-known blockchain pioneer who is among the many people who claim to be ‘Satoshi Nakamoto’, the Bitcoin creator whose true identity and whereabouts have never been revealed.
Wright is now chief scientist at nChain, a company he founded to promote Bitcoin SV.
nChain is the Tuvalu Government’s major partner in its National Digital Public Ledger project, with support also from Bitcoin consultancy Elas Digital and community tech-consultancy company Faia, whose owner George Siosi Samuels is of Tuvaluan descent and through who the ambitious plan was formed.
According to Kofe, Tuvalu has yet to decide on whether its choice of the BSV blockchain will also mean it will adopt the BSV cryptocurrency to add to its national currencies, the Tuvalu and Australian dollars.
But apart from using the BSV blockchain to generate other applications relevant to Tuvalu’s socio-economic needs, the National Digital Public Ledger will also require ordinary Tuvaluans to buy and sell using some form of digital payment system.
What this digital cash will be is still to be decided.
“Digital cash management should be as simple as having a digital wallet on your mobile phone,” said Kofe. “So with the incoming Internet and mobile access for all islands by 2022, a government supported wallet may be recommended from which ordinary Tuvaluans could simply pay for things using something similar to a QR code. This wallet may also be connected to e-government services, bringing a new level of identification, access, and convenience. A tap-and-go approach for everyday purchases would be the ideal outcome, but it will of course take time for people to make the behavioural switch from physical to digital cash. It’s more than doable since many other countries have proven to be able to make a similar switch over time as well. Physical cash may still be present, but it may just become less and less used.”
Cryptocurrency concerns
Should Tuvalu choose to adopt the BSV cryptocurrency, it will follow in the footsteps of the Republic of Marshall Islands, whose SOV coin project, now nearing Initial Coin Offering (ICO) stage, is on track to fulfilling claims by its developers that it will be the world’s first “real” cryptocurrency issued by a sovereign nation.
Although the two projects are fundamentally different in that Marshall Islands is creating its own private SOV blockchain while Tuvalu will use one that is already in the market, they underscore a very real possibility that more countries in the Pacific may head that way in the very near future.
But with insufficient research available to inform governments of their options and the noticeable absence of any regional voice on cryptocurrency, the risks carried by these nations as willing guinea pigs in digital cash experiments are as yet unknown and the benefits are only theoretical.
The Pacific Islands Forum Secretariat (PIFS) has told Islands Business that cryptocurrency is on its radar, although more as “an innovation that has the potential to garner significant economic returns and reshape the economic order.”
“It’s too early to determine a regional position on the matter, noting the experimental and evolving nature of cryptocurrencies as well as its high volatility,” said Zarak Khan, Programmes and Initiatives Director at PIFS.
“Our Economic Governance team will be undertaking further research on cryptocurrencies in the near future to identify inherent risks as well as tangible opportunities. We urge Member States to adopt a cautionary approach towards cryptocurrencies whilst these broader issues are being considered,” Khan added.
The Fiji-based regional organisation is the administrative centre for 18 member states in the Pacific region (although five Micronesian members have indicated they are withdrawing), including Australia and New Zealand. Tuvalu and Marshall Islands are among its Pacific member countries, with Marshall Islands amongst those that have begun the process to leave.
To each country, its own
To the blockchain practitioner however, no one size fits all and the steep learning curve in the use of Bitcoin or blockchain technology in general means that each country must do its own research.
“There are many private companies now that can help an economy use Bitcoin or any other crypto currency, so help to get started is available,” said Emmanuel Narokobi, founder of Masalai Communications in Papua New Guinea and also one of the few pioneers of blockchain technology in the Pacific region.
“However the interests of the users or the population of a country must still be paramount. It is no different to a PIC engaging in a mining venture or tuna fishing agreements, in the sense that you have to decide what the country needs, who are the players and at what level in the industry.”
For starters, he said, when looking at blockchain in a country, several general levels of engagement may be considered:
- Individuals or businesses that want to use local banks and cards to pay for cryptos as an investment or to use in ecommerce transactions;
- Local Banks that want to offer crypto exchanges for converting the local fiat into a crypto and vice versa;
- Individuals or businesses that want to use blockchain for applications outside of finance;
- Government use of cryptos and blockchain technology.
“Out of the four examples, Governments can easily pass legislation to manage the top three. However, the fourth must take a higher level of due diligence and research and most importantly, a clear understanding by the Government of the problems they want to solve,” said Narokobi.
“So a Government has to ask: does it want a private company managing its country’s currency? How much is that going to cost? What exact problem is it trying to solve?”
In the end, he added, the proof of concept for blockchain can only be measured by the success or failure of eCommerce.
“Meaning that if you have the fastest, cheapest Internet in your country and a well-educated population, then your economy will immediately improve due to digital transformation effects.
If that immediately improves your economy and trade with the rest of the world then maybe you don’t necessarily need a new currency just yet or if at all. If however you are hoping that by changing your currency you can immediately increase Foreign Direct Investment so that it can be used to start the digital transformation exercise, then maybe changing your currency to bitcoin could be useful.
“Ultimately in the face of any new technology that comes your way, whether the effects of engaging with it is good or bad will always start with understanding what you need first. If you do not understand your own needs or wants first, then you are open to allowing others to make decisions for you. How much in the long run will that cost you? So absolutely, research is key,” said Narokobi.
