Surfacing Climate Finance, Cryptocurrency, and Sovereignty: A Technofinancial Future of Community Well-Being in the Kingdom of Tonga

Abstract

Small Island Developing States (SIDS) face significant challenges in accessing financial resources at both macro and micro levels. At the macro level, many SIDS governments lack the institutional capacity needed to directly receive and manage climate finance from large financial institutions such as the World Bank (Roberts & Weikmans, 2017). At the micro level, families who rely on remittances sent through services like Western Union or MoneyGram often encounter high transaction fees and logistical barriers, including the need to physically collect funds from financial institutions (World Bank, 2020).

As I explored these dynamics more deeply, I became increasingly interested in how cryptocurrency might provide an alternative pathway to address these longstanding financial inequities in the Pacific. Cryptocurrency shows potential as a tool for both climate finance accessibility and broader financial infrastructure development. On a macro scale, it could streamline the disbursement and management of climate funds and strengthen governmental financial systems (Tama, 2022). On a micro scale, it holds the capacity to support small businesses, reduce remittance fees, and improve everyday financial transactions for local communities.

Several Pacific Small Island Developing States (SIDS), including Palau through its Stablecoin Program and the Marshall Islands with the sovereign digital currency SOV, are already exploring and implementing cryptocurrency solutions within their national frameworks. Vanuatu, while often cited in discussions of digital-currency experimentation, is not pursuing a government-led initiative; instead, the activity associated with Vanuatu stems from an Oxfam-led pilot, not the Vanuatu government (Carter & Farrell, 2021; IMF, 2022). Their initiatives demonstrate growing interest in digital currencies as a means of strengthening state capacity, sovereignty, and financial resilience.

Cryptocurrency, broadly defined, “is a form of digital asset that operates on an encrypted, decentralized network, enabling secure peer-to-peer transactions without the need for a central authority like a government or bank…built on blockchain technology, which is a public immutable ledger that records all transactions and ensures transparency and security” (Encyclopedia Britannica, n.d.). Although cryptocurrency itself is not traditional money, it can be monetized, converted to currency, or invested in globally through blockchain networks. This form of payment is attractive to governments and businesses because blockchain systems allow for highly secure, encrypted transactions and the permanent recording of information (Encyclopedia Britannica, n.d.).

Given these features, I saw that the broader cryptocurrency ecosystem presents a promising alternative for addressing both climate finance challenges and financial infrastructure gaps within Pacific Island nations. It offers possibilities for streamlining climate fund transfers at the state level, strengthening financial sovereignty, and reducing everyday financial burdens for citizens.

However, this potential must be balanced with critical awareness. Global Bitcoin mining and the broader cryptocurrency industry can pose environmental risks, particularly to the fragile ecosystems of the Pacific Region. Yet, emerging research also shows possibilities for mitigating these impacts through renewable energy integration and the utilization of lower-energy cryptocurrency and/or Bitcoin-mining technologies that significantly reduce environmental burdens. These developments offer pathways that future studies could explore more fully. Through frameworks like Sustainable Development Goal (SDG) 13 “Climate Action” and SDG 7 “Affordable and Clean Energy,” countries interested in digital currencies have opportunities to foster climate-conscious digital infrastructure. According to the United Nations University (2025), even though energy-intensive digital currencies can strain local resources, transitions to renewable energy sources such as hydropower, along with complementary practices like reforestation, as seen in China, can substantially offset environmental impacts. These examples indicate the potential for reimagining digital financial systems in more climate-conscious and sustainable ways.

In Tonga’s context, recently deceased Lord Fusituʻa advocated powerfully for this vision. As highlighted in "Volcanoes, Bitcoin and Remittances: A Tongan Lord Plans for Financial Security," he proposed utilizing geothermal energy, one of Tonga’s abundant natural resources, to power low-emission Bitcoin mining. His proposal reflected a broader cultural and economic aspiration: to reduce foreign financial dependence while strengthening economic sovereignty, self-sufficiency, and long-term resilience.

I recognize that many industries with historically large carbon footprints such as international shipping, aviation, and fossil fuel-based energy imports all have long operated in the Pacific with minimal accountability. These sectors have contributed significantly to emissions and ocean degradation. By contrast, a carefully regulated, locally controlled digital financial system powered by renewable energy could offer a more sustainable pathway, particularly if it reduces remittance costs, enhances financial equity, and supports community well-being.

As someone deeply interested in future studies, I was compelled to examine how cryptocurrency could be leveraged to support climate finance in Pacific Island contexts. My research led me to question how digital currencies might reshape financial ecosystems, governmental capacity, and community-level economic participation. Pacific SIDS such as Palau, the Marshall Islands, and Vanuatu are already experimenting with digital financial frameworks that provide valuable entry points for this analysis (Government of Palau, 2022; Republic of the Marshall Islands, 2018).

Ultimately, my curiosity about these intersecting issues guided me toward developing this portfolio at the nexus of climate finance, Pacific Islander state sovereignty, and community well-being. By using cryptocurrency as a focal lens, I sought to understand not only its potential opportunities and risks, but also its implications for broader techno-futures in Oceania and beyond.