This parliamentarian wants to legalize Bitcoin (BTC), in particular to reduce transaction fees on remittances from the diaspora. However, this ambitious project is far from having the support of the Kingdom’s central bank.
Legalizing Bitcoin in the Kingdom of Tonga: pros and cons
The Member of Parliament for Niuas in the Kingdom of Tonga, Lord Fusitu’a, said in an interview with the Financial Review that he is working on a bill to make Bitcoin legal tender. The bill will be presented to parliament in May 2022.
However, the project is facing reluctance from the Reserve bank of Tonga. Central bank governor Sione Ngongo Kioa had ruled out the possibility of Bitcoin becoming a legal tender alongside the current fiat currency, the Tongan pa’anga :
“The adoption of bitcoin as an official alternative currency, as you mentioned, is definitely unlikely.”
Bitcoin to strengthen Tonga’s economic backbone
Lord Fusitu’a believes the country is losing a large portion of funds from its diaspora in service fees on transfer platforms such as Western Union. According to him, Western Union takes 30% of these remittances:
“So our GDP in 2020 was $510 million and 30% of that is Western Union fees [paid by the Tongan diaspora].
Lord Fusitu’a suggests that citizens use the Strike digital wallet based on the Lightning network, to drastically reduce transfer fees:
“So instead of sending US$100 and receiving US$70, you send US$100 and receive US$100, which is 30% more disposable income. It’s like going to tell someone in the U.S. that you’re not going to pay federal income tax anymore.”
Tonga is home to about 100,000 people. The foreign diaspora of about 250,000 to 300,000 Tongans is a mainstay of the national economy:
“Remittances account for between 38% and 41.1% of our GDP, according to the World Bank figures you use. So almost half of our economy is made up of money sent by our diaspora.
Lord Fusitu’a wants to follow El Salvador’s lead, but there is no certainty at this point that his bill will get all the votes needed for passage. He has expressed his enthusiasm for Bitcoin in the past, stating that he wants to buy Bitcoins with the Kingdom’s $750 million reserve.