Bitcoin, Ethereum are types of cryptocurrencies available
Bitcoin, Ethereum are types of cryptocurrencies availableReuters

The Republic of the Marshall Islands, an island country located in the central Pacific Ocean, is set to become the first sovereign nation to issue cryptocurrency as a legal tender.

The parliament of the group of more than 1,200 islands with a population of about 50,000 on Wednesday passed a law declaring digital coin, named Sovereign (SOV), as its new currency. It will be issued later this year.

Neema, an Israel-based startup that facilitates international money transfers via an application, will develop the underlying technology of the new cryptocurrency.

"SOV is a big deal because, until now, all cryptos were in regulatory limbo," Barak Ben-Ezer, co-founder of Neema, told Bitcoin Magazine.

The move comes at a time when financial regulators around the world are growing increasingly hostile against digital currencies.

The Securities and Exchange Commission of the United States have issued dozens of subpoenas and information requests to technology companies and advisers involved in cryptocurrencies, Wall Street Journal reported on Thursday citing people familiar with the matter.

Meanwhile, the European Central Bank has repeatedly issued warnings about the dangers of investing in digital currencies.

The government of Marshall Islands will arrange an initial coin offering, proceeds of which will be used to fill its coffers ahead of the termination of U.S. reparations payments, for sustainability projects related to climate change and green energy, among others.

The Marshall Islands currently uses the U.S. dollar as its currency. The republic's main sources of revenue are substantial U.S. subsidies under a Compact of Free Association and the leasing of land for the U.S. missile testing range on Kwajalein, a coral formation in the western chain of the Republic of the Marshall Islands.

Earlier this year, Venezuela launched a cryptocurrency called Petro, claiming that it was the world's first sovereign cryptocurrency.