In a bid to free its economy, Palestine is considering a digital national currency. But with Bitcoin around, is it worth reinventing the wheel?
Using foreign currencies
There are many countries that do not have a national currency and instead use another country’s currency in daily lives. For example, East Timor, British Virgin Islands, Palau and Zimbabwe use the US dollar. Similarly, Montenegro, San Marino and Kosovo use the Euro. The case of Palestine is an interesting one as it uses multiple currencies like the US dollar, Jordanian Dinar and the Israeli Shekel.
Now, it has emerged that the Palestine Monetary Authority (PMA) is planning its own digital currency, something of a Palestinian Bitcoin.
Enter the Palestinian Pound
There are a number of digital currencies already in circulation. Bitcoin, of course, is the most popular and widely used of them all. These currencies are not issued by a central monetary authority like a central bank.
However, inspired by them some central banks have been mulling the idea of launching national cryptocurrencies as well.
We reported that Senegal was introducing a national cryptocurrency as an example. Similar plans have also been discussed with regards to Sweden and China.
A Palestinian currency thus would not be the first or unique in this respect but it does bring to fore an interesting use case: countries that have trouble printing their own currencies due to one reason or another can explore a digital currency alternative.
The proposed digital currency would be called the Palestine Pound.
Skirting Israeli curbs
The proposed digital currency can help Palestinians skirt around Israeli curbs that have been imposed and the need for obtaining clearance from them.
Azzam Shawwa, Governor of the Palestine Monetary Authority was quoted by Reuters as saying:
“If we print currency, to get it into the country you would always need clearance from the Israelis and that could be an obstacle, So that is why we don't want to go into it.”
The digital currency would largely eliminate that problem for the Palestinians. According to Reuters another problem that PMA might encounter is the 1994 Paris Protocol, which gives PMA the legitimacy of a central bank but does not allow it to issue currency. The Paris Protocol suggests that the Palestinians use the Israeli currency - The Shekel instead.
According to what the PMA governor told Reuters, the Palestine Pound is a part of the bank’s ‘five-year strategy’, which will be published before the end of 2017.
The governor also revealed that the digital currency route is a preferred alternative. It would be interesting to see if the Palestinians could pull off a national cryptocurrency in the short to medium term.
However, the governor seems to realize the scope of the wider challenge that awaits him. He revealed to Reuters:
“But it's not only the currency, you have to see the economy also. Issuing (a currency) is something, but you also need the backbone of the currency; reserves, gold, oil and that is part of the business plan.”
Bitcoin to help oppressed
While a national currency for Palestine may or may not happen, countries that do not have their own currencies can always use Bitcoin as an alternative.
As Max Keiser wrote way back in 2013 in RT:
“Bitcoin, like the spiritual leaders who have come before it in the Middle-Eastern desert, is a miraculous gift capable of transforming an oppressed, forgotten people. The Palestinian economy is a multi-billion dollar economy that unfortunately benefits mostly outsiders. But if Bitcoin were adopted as the official currency, Palestinians would be able to shape their own economic destiny and in so doing their sovereign destiny.”
If economic independence is the stated aim of the PMA, then it should probably explore what already exists instead of reinventing the wheel.