Edit Analysis - Marshall Islands

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Executive Summary

Key Pillars

- Unregulated Non-Sovereign Cryptocurrencies: For other cryptocurrencies (e.g., Bitcoin, Ethereum), there is a notable absence of specific laws governing retail trading. This means individual retail participation is permitted without direct regulatory oversight over the assets themselves.

- Virtual Asset Service Providers (VASPs): Entities operating as VASPs are regulated under the `Banking Act` as amended in 2020 and are required to obtain a financial services provider license from the Office of the Banking Commission (OBC, transitioning to the Marshall Islands Monetary Authority - MIMA). However, no VASP licenses have been publicly issued, effectively preventing local exchanges from operating.

- Decentralized Autonomous Organizations (DAOs): The Marshall Islands has a progressive legal framework for DAOs, with the `Decentralized Autonomous Organizations Act 2022` recognizing them as distinct legal entities. This aims to provide clarity and support for blockchain-based businesses.

- Transition to Monetary Authority: The `Monetary Authority Act 2025` establishes the Marshall Islands Monetary Authority (MIMA) and repealed the Sovereign Currency Act of 2018.

Landmark Laws

**Banking (Amendment) Act 2020** (P.L. 2020-24)
 - Authority: Republic of the Marshall Islands Parliament (Nitijela).
 - Date: Enacted 2020-01-01.
 - Summary: Amended the Banking Act to explicitly include 'virtual asset service provider' business as a regulated activity requiring a license from the Banking Commissioner. It imposes AML/CFT obligations on VASPs.

**Decentralized Autonomous Organizations Act 2022** (P.L. 2022-0109)
 - Authority: Republic of the Marshall Islands Parliament.
 - Date: Enacted 2022-12-22.
 - Summary: This pioneering legislation provides a comprehensive structure for the legal recognition and operation of DAOs, treating them as distinct legal entities separate from their members.

**Declaration and Issuance of the Sovereign Currency Act 2018 (Repealed)** (P.L. 2018-53)
 - Authority: Republic of the Marshall Islands Parliament (Nitijela).
 - Date: Passed on February 26, 2018; repealed in August 2025.
 - Summary: Originally declared the "Sovereign" (SOV) as a digital decentralized currency to be used as legal tender alongside the US dollar. It mandated KYC procedures and applied AML provisions from the `Banking Act`. Repealed by the Monetary Authority Act 2025.

**Monetary Authority Act 2025** (Bill No. 35)
 - Authority: Republic of the Marshall Islands Parliament.
 - Date: Enacted 2025-08-01.
 - Summary: Establishes the Marshall Islands Monetary Authority (MIMA) and includes provisions repealing the Sovereign Currency Act of 2018.

Considerations

- Asset Classification: The SOV was explicitly classified as legal tender. Other cryptocurrencies, while allowed for retail trading, do not hold legal tender status.

- Taxation: The Marshall Islands offers a tax-neutral environment, particularly for non-resident companies. If a crypto exchange or business operates without conducting business within the islands, it is generally exempt from local taxes. For individual retail traders of non-sovereign cryptocurrencies, the tax implications are not explicitly detailed, but the general "tax-neutral" stance suggests a light touch.

- Anti-Money Laundering (AML) / Counter-Financing of Terrorism (CFT): The repealed `Sovereign Currency Act 2018` included AML provisions for the SOV. The IMF has repeatedly warned the Marshall Islands about potential risks to financial integrity, particularly concerning the digital assets sector and the country's ability to adequately meet AML/CFT requirements, which could jeopardize its crucial correspondent banking relationships.

- Operational Environment: No local VASPs are currently licensed; residents must use foreign exchanges. The domestic banking sector is fragile, with only one domestic bank having a US correspondent relationship, which is under constant threat due to perceived crypto risks.

Notes

Detailed Content

Detailed Explanation

Retail cryptocurrency trading in the Marshall Islands is categorized as 'Allowed-Unregulated' for non-sovereign cryptocurrencies. This status indicates that while there are no explicit prohibitions against individuals trading assets like Bitcoin or Ethereum, there is a comprehensive absence of a specific regulatory framework governing these retail activities. The regulatory focus has shifted significantly following the repeal of the controversial Sovereign Currency Act of 2018 in August 2025, which ended the state-backed digital currency (SOV) project. The country's current approach is characterized by a light-touch regulatory environment for individual traders, who are permitted to engage in trading but must do so exclusively through offshore platforms due to the lack of licensed local exchanges. The general 'tax-neutral' stance of the jurisdiction further supports this permissive environment for retail participants, though specific tax implications for individual traders are not explicitly detailed. The regulatory framework that does exist is primarily focused on intermediaries and maintaining financial integrity, rather than on restricting or overseeing retail trading directly. Virtual Asset Service Providers (VASPs) are regulated under the Banking Act as amended by the Banking (Amendment) Act 2020, which requires them to obtain a financial services provider license and imposes Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) obligations. However, no VASP licenses have been publicly issued to date, creating a gap where the law exists but no local operational entities are authorized. Concurrently, the Marshall Islands has positioned itself as a progressive hub for blockchain-based corporate structures through the Decentralized Autonomous Organizations Act 2022, which provides clear legal recognition for DAOs as distinct entities. The establishment of the Marshall Islands Monetary Authority (MIMA) via the Monetary Authority Act 2025 represents a centralization of financial oversight, repealing the SOV Act and marking a strategic pivot from state-issued digital currency to fostering a regulatory environment for Web3 business entities, while continuing to address international concerns, notably from the IMF, regarding AML/CFT risks and the preservation of crucial correspondent banking relationships.

Bullet Points

**I. Regulatory Status**
*   Retail trading of *non-sovereign cryptocurrencies* (e.g., Bitcoin, Ethereum) is *Allowed-Unregulated*.
    *   No explicit prohibitions exist for individual retail traders.
    *   No comprehensive regulatory framework specifically governs the retail trading of these assets.
*   The state-backed digital currency (SOV) project was terminated with the repeal of the Sovereign Currency Act 2018 in August 2025.

**II. Key Regulatory Bodies**
*   **Office of the Banking Commission (OBC) / Marshall Islands Monetary Authority (MIMA):** The OBC, which is transitioning to MIMA, is the authority responsible for licensing and supervising Virtual Asset Service Providers (VASPs) under the Banking Act.

**III. Important Legislation**
*   **Banking (Amendment) Act 2020 (P.L. 2020-24):** Enacted 2020-01-01. Amended the Banking Act to explicitly include 'virtual asset service provider' business as a regulated activity requiring a license. It imposes AML/CFT obligations on VASPs.
*   **Decentralized Autonomous Organizations Act 2022 (P.L. 2022-0109):** Enacted 2022-12-22. Provides a comprehensive legal structure recognizing DAOs as distinct legal entities, separate from their members.
*   **Declaration and Issuance of the Sovereign Currency Act 2018 (Repealed) (P.L. 2018-53):** Passed 2018-02-26; repealed in August 2025. Originally declared the 'Sovereign' (SOV) as a digital decentralized legal tender alongside the US dollar. It mandated KYC and applied AML provisions.
*   **Monetary Authority Act 2025 (Bill No. 35):** Enacted 2025-08-01. Establishes the Marshall Islands Monetary Authority (MIMA) and repealed the Sovereign Currency Act of 2018.

**IV. Compliance Requirements**
*   For **Virtual Asset Service Providers (VASPs):** Must obtain a financial services provider license from the OBC/MIMA under the Banking (Amendment) Act 2020 and comply with AML/CFT obligations.
*   For **Individual Retail Traders:** No specific compliance requirements are detailed for trading non-sovereign cryptocurrencies.

**V. Notable Restrictions or Limitations**
*   **No Licensed Local Exchanges:** Despite the VASP licensing law, *no VASP licenses have been publicly issued*, effectively preventing local cryptocurrency exchanges from operating.
*   **Reliance on Offshore Platforms:** Residents must use foreign, offshore exchanges for retail trading activities.
*   **Fragile Banking Access:** The domestic banking sector is fragile, with only one domestic bank having a US correspondent relationship, which is under constant threat due to perceived risks from the crypto sector.

**VI. Recent Developments or Notes**
*   The repeal of the Sovereign Currency Act 2018 in August 2025 marks a major strategic pivot, moving away from a state-issued digital currency towards becoming a corporate registry hub for Web3 entities like DAOs.
*   The IMF has repeatedly warned the Marshall Islands about potential AML/CFT risks in the digital assets sector, which could jeopardize its crucial correspondent banking relationships.
*   The regulatory focus has shifted to AML/CFT compliance and the establishment of the Marshall Islands Monetary Authority (MIMA).
*   The jurisdiction offers a *tax-neutral environment*, particularly for non-resident companies. For individual retail traders, tax implications are not explicitly detailed but the general stance suggests a light touch.

Full Analysis Report

Complete markdown report for this analysis

## Report on Retail Trading Status of Cryptocurrencies in the Marshall Islands

**Date:** 2025-12-31

**Topic:** Retail_Trading_Status

**Description:** Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity.

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### Retail_Trading_Status: Allowed-UnRegulated

**Narrative Explanation:**

Retail cryptocurrency trading is legally permitted in the Marshall Islands, but the domestic regulatory environment for service providers is underdeveloped. The government passed the `Banking (Amendment) Act 2020` to license and regulate Virtual Asset Service Providers (VASPs) under the Banking Commission. However, as of late 2025, no VASP licenses have been publicly issued, effectively preventing local exchanges from operating. Consequently, residents must rely entirely on international, offshore platforms to buy, sell, and hold cryptocurrencies. There are no bans or restrictions on individuals engaging in this activity.

The country's previous initiative to launch a national digital currency, the "Sovereign" (SOV), was formally terminated in August 2025 when the `Monetary Authority Act 2025` repealed the `Sovereign Currency Act of 2018`. This move followed years of warnings from the International Monetary Fund (IMF) and the US Treasury about the risks posed to the nation's fragile correspondent banking relationships. This pivot away from a state-issued digital currency marks a significant shift in policy.

Despite the lack of local exchange infrastructure, the Marshall Islands has become a significant global hub for the registration of Decentralized Autonomous Organizations (DAOs) under the `Decentralized Autonomous Organizations Act 2022`. This progressive legislation recognizes DAOs as legal entities (LLC structure), attracting blockchain-based businesses for corporate registration purposes.

The regulatory focus remains on Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) compliance for any entity operating within the financial system, overseen by the Financial Intelligence Unit. For the individual retail trader, this means activity is allowed but takes place in a context where the local financial system does not actively support it due to de-risking concerns. No specific domestic regulations govern the act of trading by individuals for non-sovereign cryptocurrencies, confirming its "Allowed-UnRegulated" status.

**Relevant Text Excerpts and Sources:**

*   **Banking (Amendment) Act 2020:** "No virtual asset service provider business shall be transacted by a corporation or entity incorporated or otherwise formed in the Republic except by a licensed financial services provider." (Source: RMI Courts)
*   **IMF Staff Concluding Statement (2025):** "In line with IMF advice, the MA Act was passed in August 2025, with a provision repealing the SOV Act." (Source: IMF)
*   **Pontinova Law Analysis (2025):** "Marshall Islands currently does not offer VASP licenses, effectively making it illegal to operate a VASP in the Marshall Islands." This highlights the operational constraint for local businesses, not a ban on individual trading.
*   **Decentralized Autonomous Organizations Act 2022:** "An Act to provide for the formation, organization, and operation of decentralized autonomous organizations as limited liability companies." (Source: RMI Parliament)
*   **Freeman Law:** "The Marshall Islands has enacted legislation authorizing the launching of its own national cryptocurrency to serve as legal tender..." (Note: This refers to the now-repealed SOV Act).
*   **Carlos Maiz (2025 Guide):** "✓ Cryptocurrency ownership and trading is legal; ✓ The government supports blockchain innovation... ❌ There are no domestic crypto exchanges operating locally."

**Direct URL Links to Sources:**

*   https://rmicourts.org/wp-content/uploads/2022/07/Banking-Amendment-Act-2020.pdf
*   https://www.imf.org/en/News/Articles/2025/09/10/mcs091025-republic-of-the-marshall-islands-staff-concluding-statement-of-the-2025-article-iv-mission
*   https://rmiparliament.org/cms/images/LEGISLATION/PRINCIPAL/2022/2022-0109/DecentralizedAutonomousOrganizationDAOAct2022_1.pdf
*   https://freemanlaw.com/marshall-islands-cryptocurrency/
*   https://carlosmaiz.com/crypto-exchanges/marshall-islands/
*   https://www.pontinova.law/post/setting-up-a-dao-as-a-marshall-islands-llc

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