Cryptocurrencies have seen their boom and bust. Many early adopters sought to use them as a means of circumventing traditional fundraising boundaries and norms. But the next generation of crypto is rising and may be promulgated by the national governments and central banks seeking to re-establish those norms.

Europe is out

Some nations have been taken out of the game even before they got going. Estonia (of e-citizenship fame), was rumored to be considering launching a national cryptocurrency. But the Estonian government made it clear in June last year that rumours were just that: rumors.

Indeed, European authorities have ruled it out for all members, most forcefully through ECB President Mario Draghi’s statement targeted at sub-national cryptocurrencies, “no member state can introduce its own currency; the currency of the eurozone is the euro.”

El Petro? No thank you

Venezuelan President Maduro launched a national cryptocurrency, the El Petro, linked to the underlying value of its oil reserves and other hard assets. Intended to help solve Venezuela’s currency problems, it has found favour with neither cryptotraders, traditional financiers, Venezuelans citizens nor American regulators. The United States government (via President Donald Trump, by executive order) outright and preemptively banned any dealing in any cryptocurrency promulgated by Venezuela. The Venezuelan government is currently challenging this sanction at the World Trade Organization under GATS regulations.

This has not stopped the government from trying to force the currency on its own citizens or companies. In December, the government took bolivars (the national currency) out of pension accounts and replaced them with Petro. It announced in January a massive social housing project that would pay construction companies in Petro and local banks have been told they must accept it.

However, domestic and potential partners are not buying it – literally. Chinese, Russian and even Belarusian partners have declined to use the Petro. Valuation is one part of the problem. The Venezuelan government claims each Petro is backed by a barrel of oil reserves.

However, given the fluctuating price of oil or questions about whether those reserves exist, skepticism abounds. The future of the Petro does not seem bright.

Marshalling their crypto resources

Small countries that have not previously had the heft to support their own central bank may be motivated to try and gain some control over domestic monetary policy. The tiny Marshall Islands passed a parliamentary resolution to create their own national cryptocurrency, the sovereign. In November, President Hilda Heine survived a vote of non-confidence on the issue to move forward.

Ran Neuer of CNBC’s Crypto Trader program was the first to notice that as a national currency, banks and other institutions would be forced to accept it. Working with the Israeli company Neema, the Marshall Islands plans to issue a currency capped at 24 million units (to prevent devaluation). When the plan was mooted last September, the IMF warned the Marshall Islands off the project.

Their concern is the potential for the Republic of the Marshall Islands being cut off from U.S. dollar clearing and thereby their access to U.S. dollar denominated aid that underpins the economy for the 53,000 odd people living there. The nation has only one correspondent banking relationship; the IMF is arguing that issuing a cryptocurrency could put its relationship at risk if the bank deems the Islands to be a bad bet.

However, the Islands are forging ahead and will make the currency an official currency alongside the U.S. dollar. “This is a historic moment for our people, finally issuing and using our own currency, alongside the USD,” said President Heine. They have hired noted cryptocurrency expert Steve Tendon to assist in the design along with key advisor is Steve Dittus, the former Secretary General of the Bank of International Settlements.

China – A different kind of crypto

A big player considering joining the crypto world is one that has also been its harshest enemy – China. China banned ICOs and cryptocurrencies as a speculative craze threatening regular citizens – and China’s famously strict capital controls.

But software teams in the People’s Bank of China are reportedly examining the possibility of creating a digital asset. They have registered scores of blockchain patents. With China already poised as a leading cashless society, the motivation for creating a digital currency is very different from cash-strapped Venezuela or the independence-minded Marshall Islands. The yuan is widely used, stable and playing an increasing role in global finance. The interest is domestic.

For the Chinese government, popular payment platforms like WeChat and AliPay (of Alibaba) are essentially transparent to them. Creating a blockchain based cryptocurrency would further enable transparency across the entirety of transactions in the economy. Individual transaction records and banks’ adherence to policy measures alike would become even more visible to the government and regulators.

Very few details about an actual plan have been released, but if any country has the technological, economic and coercive power to create a digital currency and compel its citizens to use it, it is China. Where it leads, others may follow.

The first – or the last

For small players, an unsuccessful launch or blowback from a national cryptocurrency from the international monetary community could deter governments for decades to come. But the idea is not a complete pariah in the august halls of global financial influencers.

Christine Lagarde, the IMF’s top official, recommends harnessing the power of cryptocurrency, rather than forcing them underground to become the tool of criminals. To quote her March 13, 2018, IMF blog post, “We can harness the potential of crypto-assets while ensuring that they never become a haven for illegal activity or a source of financial vulnerability.” She reaffirmed her support at the Singapore Fintech Festival in November last year. Her views are nuanced and developing, but generally optimistic, seeing a continued role for central banks alongside cryptocurrencies.

The motivations for establishing a national cryptocurrency range from quick fixes for self-inflicted national economic disasters to asserting national monetary independence to capitalising on blockchain’s transparency virtues. While the majority of cryptocurrencies are suffering in today’s markets, the next generation may not come from tech-savvy entrepreneurs seeking to burst international fundraising boundaries and norms, but come from national governments seeking to reestablish those boundaries using blockchain technology.