Palau’s Ministry of Finance has declared the initial phase of the Palau Stablecoin (PSC) Program a triumph, showcasing promising results. This national stablecoin, pegged to the U.S. dollar, aims to advance digital innovation and financial modernization within the Republic of Palau. The government intends to build on this success, with plans to extend the use of PSC on a nationwide scale, as disclosed in a report on December 7.
In collaboration with Ripple, the three-month PSC project utilized the XRP Ledger central bank digital currency (CBDC) platform. The initiative involved 168 volunteers, primarily government employees, who engaged in retail transactions totaling 100 PSC at local participating retailers. The response from both volunteers and retailers was overwhelmingly positive, laying the foundation for further development.
Transactions were facilitated through a phone application, leveraging QR codes or manual input of wallet addresses. Exclusively, the retailers had the capability to redeem PSC for U.S. dollars, Palau’s official currency. Importantly, the PSC was fully backed by $20,000 in a Tier 1 Federal Deposit Insurance Corporation (FDIC) U.S. bank, ensuring stability and security.
The study highlighted several advantages of the PSC, including reduced fees associated with financial transactions, a decreased carbon footprint in monetary operations, and enhanced financial inclusion, especially for regions without accessible banks. The report underscored Palau’s dedication to digital innovation and financial modernization through the Stablecoin program.
Future phases of the project are anticipated to focus on educational initiatives and address legal and regulatory aspects. Users expressed interest in potential use cases such as peer-to-peer transfers and remittances.
Palau, with a population of approximately 18,000, embarked on its exploration of digital currency in 2021, with Ripple actively engaged from the project’s inception. Ripple introduced its CBDC platform in May, and in collaboration with Binance, Palau successfully implemented a digital identification program. The PSC program, initiated in July and concluding in September, marks a significant step forward in Palau’s commitment to embracing cutting-edge financial solutions.