Auroracoin, dubbed ‘a cryptocurrency for Iceland’, has reached 10% of its total ‘Airdrop’ distribution goal.

Although news about the digital currency has been quiet since its nationwide dissemination, the project will soon launch a gateway that will better integrate with the country’s ID system in order to streamline the process via which Icelandic residents obtain auroracoin.

Furthermore, recent developers suggest that the altcoin is quietly increasing awareness about Icelandic monetary policy, and generating new discussions about the role digital currencies can play in the country’s financial future.

As an example, one of the largest banks in Iceland recently held an educational session on bitcoin, with one bank executive saying that it is closely paying attention to decentralized forms of money.

Icekey

Iceland’s Islykill (Icekey) national registry provides a unique identifier that is now being used to verify Icelandic residency and thus qualification for the auroracoin Airdrop distribution.

Baldur Friggjar Óðinsson, auroracoin’s founder, said that he applied to the government to integrate with this system, and it was accepted.

This means that the coins will be more widely disbursed to the people of Iceland, he explained, adding:

“It means 100% of people will be able to claim, if they so choose. Parents will be able to claim for their children and so forth.”

The application was put in with the government weeks before Airdrop, the initiative to disburse the coins, was launched. However, there was a considerable delay in getting it approved, according to Óðinsson.

A volatile past

The auroracoin Airdrop has been able to dispense 1,049,527 coins to Icelanders so far – 10% of a total 10,500,000 AUR to be distributed, according to its official website.

Auroracoin was launched in February to raise awareness of the capital controls that have been in place in Iceland since the global financial crisis of 2008. So, far it has been proven to be an interesting economic experiment thanks to its unique distribution method, one that other altcoin creators have been quick to reproduce.

Prior to Airdrop, investors were speculating on auroracoin’s future, which led to heavy trading on a relatively thin market since most of the coins were being held for distribution.

While at one time auroracoin was third in market capitalization when compared with other cryptocurrencies, it has since dropped down to 34th overall, according to Coinmarketcap.com.

That speculation in auroracoin resulted in a huge price spike prior to Airdrop with the value of one coin exceeding $97 in early March before beginning a long slide downward.

After the Airdrop disbursement initiated on March 25, the price of auroracoin dropped by 50% as those receiving coins cashed them out – mostly for bitcoin on digital currency exchanges.

Novel approach

Auroracoin planned to give each person in Iceland with a registered Icekey number 31.8 AUR, available via a registration page on its website that was only accessible in Iceland. The day prior to Airdrop’s initial distribution on 25 March, those coins would have been worth $385.

Today, with the auroracoin price at approximately $0.56, the same amount is worth less than $20.

A number of people within the industry had mixed opinions on whether auroracoin’s unique method of distributing coins would be effective. Even more of an issue was the true utility of the coin as a form of value.

The main concern some levied is that auroracoin is not permissible as a form of payment in Iceland, which might make it a purely speculative instrument and not an alternative to the country’s national currency, the krona.

Effectively, the Icelandic government’s heavy-handed control of the country’s banking sector means the krona is the only legal payment option within the country right now.

So, people aren’t spending auroracoin, and instead they are selling it. The main factor that leads to this conclusion is that heaviest trading for auroracoin didn’t occur in its speculative pre-Airdrop phase. It actually happened the week after the coin was released to Iceland residents, who then promptly cashed them out.

Banks investigate bitcoin

While Iceland’s parliament has been discussing what to do about auroracoin and other digital currencies, one of the country’s largest banks, Íslandsbanki, recently held an educational session on the subject of bitcoin.

Held by Íslandsbanki’s wealth management unit, the event was reportedly one of the first to ever publicly discuss digital currencies in Iceland. The meeting was held in a Reykjavik concert hall, just down the street from the country’s central bank.

A number of Íslandsbanki executives spoke, and there were some panels consisting of economists and leaders from the country’s payments industry. One attendee at the event was able to provide translated quotes to CoinDesk.

Sverrir Þorvaldsson, the director of risk at Íslandsbanki, told the audience early on:

“The bank is not a participant in the bitcoin community in any way, but we keep a watchful eye.”

During the session, Þorvaldsson later added that bitcoin’s value is still deeply tied to traditional money:

“I think it is interesting to shine a light on the role of these exchanges for bitcoin, and the fact that it seems that these coins are still very dependent on people being able to exchange them for traditional currencies.”

Þorvaldsson aslo mentioned auroracoin, saying that its ties to government-backed money is also the reason it is successful.

Capital controls

Íslandsbanki holding a meeting about bitcoin is significant since Iceland’s capital controls limit the ability for financial institutions to have access to global markets. And those restrictions have largely insulated the country from cyrptocurrencies before aurorcoin was launched.

During the global financial crisis in 2008, global cross-border capital flows were reduced significantly.

Although it did trend back up in 2010, capital flows have gone back down during the past few years that such information has been available.

This is an interesting metric that can only be attributed to government-backed money since decentralized forms of value have no borders and are currently not encumbered by banks susceptible to monetary policy.

Iceland’s capital controls were enacted to protect the country’s interests from outside forces and create a stronger internal economic environment.

Óðinsson, auroracoin’s founder, thinks that the restrictions have gone on for far too long:

“The longer the capital controls remain in place, the harder it will be to get rid of them. They were only supposed to last a few months initially, now we are closing in on six years.”

Logo image via Official Auroracoin Website