Will the Polynesian kingdom of Tonga make bitcoin a legal and official currency before the end of this year? In any case, this is what Lord Fusitu’a said. The South Pacific island nation of Tonga could introduce bitcoin (BTC) as legal tender by the second quarter of 2023. It could also start mining bitcoins using geothermal energy as early as the third quarter of this same year. year.
Legalization of bitcoin in Tonga, a long-standing project
Tonga is a Pacific island nation and the only constitutional monarchy in the region. It is made up of more than 169 islands, of which only 36 are currently inhabited. To boost its economy, the former member of the Tongan parliament, Lord Fusitu’a, wants the legalization of bitcoin in the country. Since 2021, in collaboration with members of his parliamentary faction, Lord Fusitu’a has been preparing a bill on the legalization of bitcoin as a legal means of payment in the Kingdom. In interview given to Financial Review, the former parliamentarian had said the bill would be introduced in the country’s parliament in May 2022.
Lord Fusitu’a has been campaigning for years for the legalization of bitcoin in the monarchy. However, the former parliamentarian had encountered resistance from the governor of the National Reserve Bank of Tonga, Sione Ngongo Kioa, who considers this project improbable. Furthermore, Lord Fusitu’a continues to assert that the bill to legalize and adopt bitcoin as the official currency in Tonga is still on the table. Its project is developed in a plan comprising four major axes.
Lord Fusitu’a’s Bill
The former MP explained his four-part plan which he said would change daily life and the economy in Tonga. This project inspired by the bitcoin law in El Salvador consists of initially providing financial education to Tongans on bitcoin payments. Make the latter a legal means of payment, then set up the mining network in Tonga, and finally create the national crypto treasures. The Bitcoin advocate is convinced of his project and is very optimistic. He estimates that no later than the second week of February 2023, the law will be published in the gazette Tongan.
Lord Fusitu’a places an emphasis on popularizing bitcoin via tax education for the people of the country. Indeed, the country’s economy is highly dependent on remittances from abroad. He advocates a bitcoin circular economy, because, he says, he is tired of seeing families in developing countries lose a large part of their income because of the commissions imposed on them by intermediaries. And if the project of making bitcoin an official currency in Tonga is close to the heart of this former deputy, it is above all because he wishes to facilitate the transfer of funds and make profitable the many volcanic mountains of the kingdom.
Facilitate the transfer of funds from abroad to the Tonga Islands
The developing island state has a population of approximately 105,517 inhabitants and uses as currency the Tongan paʻanga. This is equivalent to $0.43 each. However, Tonga has nearly 300,000 citizens working overseas. Indeed, there are more Tongans outside than inside the kingdom. In total, more than double the population lives in the diaspora. Thus, the transfer of funds from abroad is crucial for the country. Tonga’s national economy relies on remittances from its diaspora at nearly 40%.
Indeed, Tonga’s economy is highly dependent on remittances from the United States, Australia and New Zealand. These countries host due to the large number of Tongans. For example, there are more Tongans in Australia than in the island state itself. This explains all the interest for the country to adopt bitcoin. This could facilitate a smooth transfer of funds with reduced fees and financial inclusion for all Tongans.
Lord Fusitu’a believes that the country is recording shortfalls in funds from its diaspora in service fees on transfer platforms such as Western Union. For example, he stated that “ Tonga’s GDP in 2020 was $510 million. And 40% of that GDP is just over $200 million. Thus, 30% of this amount, or $60 million, was retained in commissions from Western Union. “. In view of this, the so-called bitcoin advocate estimates that bitcoin transactions, with relatively zero fees, would lead to an income boost of around 30% for all Tongans on remittances.
Tonga’s volcanoes could be used for mining
It would be a second after El Salvador. As a reminder, in a tweet published on the evening of June 9, 2021, Salvadoran President Nayib Bukele announced that his country would invest in bitcoin mining using geothermal energy from its volcanoes. Lord Fusitu’a’s project expects to copy the same model. This will be a boon for the bitcoin mining industry, which wants to be more environmentally friendly. Indeed, the island country has a total of 21 volcanoes, or one volcano for approximately 5,000 inhabitants.
” It takes two megawatts of electricity to serve 5,000 people. Thus, 40,000 megawatts will serve the entire national grid. Each volcano can produce 95,000 megawatts at any given time, leaving a lot to lose », explains Lord Fusitu’a. ” We will give hash huts to each family. But at the moment we only have 20,000 devices for 20,000 families. “. If mining starts, each volcano could generate at least $2,000 daily which will be distributed to Tongan families.
Financial challenge facing the mining megaproject
To ensure the production of geothermal energy, the monarchy faces a financial challenge. Indeed, the island state Tonga needs more than 26 million dollars for the cabling necessary for the construction of the mining network. Unsurprisingly, the World Bank is not ready to support this project. She said Tonga did not have a guarantee for this funding. However, the country has managed to raise funds through Least Developed Countries Grant (a grant for least developed countries). Furthermore, Lord Fusitu’a also claimed to have negotiated a free offer of the mining technology without however revealing the details.
Very convinced in his approach, Lord Fusitu’a remains optimistic. Bitcoin could be recognized as official currency in Tonga before the end of this year. Thanks to geothermal energy and its many beaches, the country would be very attractive for miners and ecosystem players wishing to do tourism. Tonga is a well-known country in the crypto ecosystem. Indeed, on January 15, 2022, during the volcanic eruption of Hunga Tonga-Hunga, one of the volcanoes of the archipelago, the community had raised several thousand dollars in BTC for the victims via a crypto wallet shared by Lord Fusitu ‘To. During this year 2023, do you think other countries will follow in El Salvador’s footsteps?
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