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Cryptocurrency and China influence test Pacific island's presidency

Head of Marshall Islands Hilda Heine narrowly survives no confidence vote

President of Marshall Islands Hilda Heine narrowly survived a vote of no confidence Monday.   © AP

AUCKLAND -- Marshall Islands President Hilda Heine narrowly survived a vote of no confidence Monday after a political struggle over cryptocurrency and an alleged Chinese plan to seize control of an atoll.

The 67-year-old sole Pacific female head of state survived the vote as parliament was split 16-16 and her opponents fell short of the 17 they needed to topple her.

Heine is pushing ahead with the controversial introduction of a digital currency, known as the Sovereign, for the Marshall Islands. The plan is to give the cryptocurrency the same status as the U.S. dollar as the country's currency. The vote of no confidence came after eight senators accused the president of tarnishing the reputation of the country with her proposed introduction of a state-backed cryptocurrency.

China also played a key role in events, as a Beijing-backed business plan was seen undermining the sovereignty of Pacific Island republic. China reportedly has plans to turn Rongelap, an atoll that was close to U.S. nuclear test sites that is inhabited by just 20 people, into a special administrative zone that would include a tax-free port and offshore company registration.

The Marshalls has no formal political parties but Heine faced opposition from a former president, Casten Nemra. He cited grounds which included the government's reputation over the sovereign. He also claimed that the government had failed to investigate the loss of $1 billion from the Marshall Islands Trust Fund, set up by the U.S. to compensate Marshallese affected by the nuclear tests. Complaints about government shipping services, voting procedures and actions of senators in the assembly were also raised during the no-confidence motion.

Heine told the Nitijela, or the parliament, the bid to overthrow her was a "referendum about our own politics."

China plans to take over one of Marshall Islands atoll, with an aim of making it into a special administrative zone.   © AP

Finance Minister Brenson Wase said the government would move ahead with its digital currency and was only waiting to meet requirements from the International Monetary Fund, the U.S. and Europe.

The government's interest in the sovereign was sparked after an Israel startup, Neema, convinced leaders the country could earn at least $30 million from the endeavor.

According to Israel's Haaretz news outlet, entrepreneur Barak Ben-Ezer said the Sovereign would be legal tender and "real money... like the dollar, the euro and the yen."

He said in developing the currency, Neema had been looking for a country that did not have a currency of its own and the Marshalls fitted the criteria. The sovereign would have equal status with the U.S. dollar as a form of payment.

While the Marshalls has complained about lack of control over its own currency, much of its revenue is made up of U.S. aid and licensing form tuna fishing, paid in U.S. dollars.

Heine welcomed the currency as a "historic moment for our people."

However in a statement in September, the IMF warned the Marshalls off the sovereign, saying "the potential benefits from revenue gains appear considerably smaller than the potential costs." The body said the country could faces problems such as economic and reputational damage, risks of money laundering and terrorist financing.

"In the absence of adequate measures to mitigate them, the authorities should seriously reconsider the issuance of the digital currency as legal tender," the IMF said.

The other area of contention is around the fate of Rongelap. The idea was reportedly mooted by Cary Yan, a Chinese businessman and Marshall Islands citizen, at the Asia World Expo in Hong Kong in April.

While several Marshallese politicians put their name to the plan, Heine's government has rejected legislation to set it up.

Last week she told Radio New Zealand the plan was an "effort by certain foreign interests to take control of one of our atolls and turn it into a country within our own country," and separately naming China.

"We have to be cautious knowing what the geopolitical situation is in the Pacific region, and I think it's important for the government to do its own due diligence and make sure that the sovereignty of the Pacific is secure," she said.

The Marshalls is one of the few remaining states in the world to diplomatically recognize Taiwan.

Heine has been president since 2016. Home to 54,000 people spread over 29 coral atolls in the central Pacific, the Marshall Islands has been occupied by Germany and Japan, and is an associated state of the U.S.

It has been used for 67 U.S. nuclear bomb tests at Bikini and Enewetak atolls. Its Kwajalein Atoll is home to the U.S. Army's strategic and tactical missile testing facility.

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