Myanmar’s Military Government to Launch a Digital Currency

TL;DR

Since the ouster of the democratically elected government of Myanmar by a military coup in February 2021, the economic woes have further worsened. With an economic growth rate of -18%, the Myanmar Military Government plans to launch a digital currency to help their local economy. The news is coming after the shadow government of the country adopted Tether (USDT) as its official currency.

In this article, we will examine the economic timeline of Myanmar and the economic impact of this recent development.

According to a Bloomberg news report, the Deputy Minister of Information, Major General Zaw Min Tun said the government was to launch a digital currency but had not yet decided on whether to work with local companies or do it on their own. After the World Bank estimated the economic growth rate of 1%, the government needs something special to improve the living conditions of Myanmarese considering the turbulent political climate.

A new digital currency is a deviation from the government's initial stance on digital assets. Under the leadership of Aung San Suu Kyi in 2020, Myanmar's Central Bank declared digital assets illegal and threatened jail time for anyone trading digital assets in the country, despite the lack of legal backing for such a declaration. In February 2021, the military junta seized control and they have approached the subject quite differently. However, even the National Unity Government, the shadow government, has declared USDT to be their official currency. It indicates that there is a consensus from both sides on the use of blockchain technology.

Some questions like does the military government have the technical capacity for building its digital currency? still need to be answered. What is the take of the Central Bank of Myanmar on this new development? What is the regulatory framework for this new currency? etc

Central Bank of Myanmar and Cryptocurrency

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Here is a timeline of the response of the Central Bank of Myanmar to cryptocurrencies.

May 2019- The bank made an announcement where they stated that cryptocurrencies are not recognized as a legal tender in the country. In addition, they noted that banks and financial institutions are not permitted to facilitate or accept transactions involving cryptocurrencies.

May 2020- The Central Bank of Myanmar (CBM) announced the cryptocurrency ban in the country. They barred financial institutions from facilitating trades using cryptocurrencies; they also threatened imprisonment for individuals involved in the trade of cryptocurrencies. However, many experts questioned this announcement as there was no such provision in Myanmarese law.
December 2021- In a Facebook post, Tin Tun, the Finance Minister of the National Unity Government (NUG) announced that they were adopting Stablecoin Tether (USDT) as their official currency. The NUG is a government in exile that was formed after the Coup d'etat.

Representatives of the National League for Democracy (the deposed ruling party of former state counselor Aung San Suu Kyi), insurgent groups representing ethnic minorities, and other minor parties make up the coalition.

The NUG has chosen Tether as a means of receiving untraceable payments in the country. According to Tin Tun Saing in a Facebook post, the purpose is to finance a revolution in the country. Tether coin (USDT) was chosen because its value is pegged to the US Dollar, and it is more stable than other cryptocurrencies.

February 2022- The Myanmar Military Government announced the plans to launch their digital currency as a means of helping the country's economy.

Going by the timeline of activities, you observe an antagonistic response to the subject of cryptocurrencies from the CBM. The bank's main reservation against cryptocurrencies is the decentralization of the currency. Like other experts and government figures in most parts of the world, the inability to understand and control cryptocurrencies gives them a prejudice against the currency. However, local traders of cryptocurrency in Myanmar are usually undeterred in their efforts. In a statement by one of the country's tech CEOs, U Nyein Chan Soe Win, the government cannot rule cryptocurrencies as illegal without an existing law.

In a report by Al Jazeera, the Myanmar banking sector has been thrown into turmoil as the Kyat fell by over 60% since the violent overthrow of the government. Thus, in efforts to redeem their image and probably revive a weakened economy, the Military Government has announced plans for a digital currency. However, since the announcement of this proposal by the Deputy Minister of Information, there has been no reaction from officials at the Central Bank of Myanmar. It will be a huge surprise if any official representative of the bank has an opposing take on the subject. It is not yet known what will be the stance of the military government on the subject of bitcoins, Ethereum, litecoins, Tether as well as other cryptocurrencies.

Impact of Digital Currency on Myanmar's Economy

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With the turn of events in Myanmar, it remains to be seen if there is any headway out of the perilous times the country is in.

On the 31st of January 2022, the US government imposed sanctions on some members and supporters of the Myanmar military government. According to Anthony Blinken, the US Secretary of State, "we are coordinating these actions with the United Kingdom and Canada to demonstrate the international community’s strong support for the people of Burma". This step may further worsen the economic conditions of the people of the country.

Considering the amount of technical input needed to create a digital currency, the announcement of a digital currency will provide little or no immediate respite to the economic woes the citizens are facing. Also, digital currencies have not lived up to the hype of really improving any country's economy hence there is no assurance that they will do so in Myanmar. The military government needs to come up with a more viable action plan to counter the depression facing the Myanmar economy.



Author: Gate.io Observer: Olatunji. M
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