The Republic of Palau has announced the successful completion of the first phase of its stablecoin pilot project in a recent report. The pilot, which started in June 2023, involved 200 volunteers and utilized Ripple Ledger technology to control wallet transactions. This initiative is a part of Palau’s broader strategy to embrace digital currency and financial innovation.
Over 700 transactions were carried out during the pilot, with more than 400 of them being payments made to retail merchants. The Ministry of Finance (MOF) of Palau reported positive feedback from both participants and retailers involved in the trial. This groundbreaking experiment utilized Ripple’s XRP Ledger central bank digital currency (CBDC) platform and saw the enthusiastic participation of 168 government employees who used PSC for transactions at local retailers.
Transactions in the pilot were executed through the use of mobile phones, either by scanning QR codes or manually inputting wallet addresses. Notably, the PSC was fully collateralized by a substantial sum of $20,000 in a Tier 1 Federal Deposit Insurance Corporation (FDIC) United States bank, ensuring its stability and reliability.
Beyond these technical aspects, the pilot also showcased several potential benefits, including the reduction of transaction fees, a diminished carbon footprint associated with the country’s currency, and enhanced financial inclusion, particularly on remote islands without access to banks and thus, traditional banking services.
Will there be a second phase?
While there’s no explicit mention of a second phase, the MOF’s goal is to implement the PSC nationally as a convenient and cost-effective payment method. Future phases will focus on extending the reach of the stablecoin, with a high emphasis on compliance and legal frameworks. This includes educational campaigns to demonstrate the benefits of using PSC as a digital cash alternative.
Palau has been exploring digital currency since 2021, with Ripple involved from the start. Ripple introduced its CBDC platform in May, and Binance assisted Palau in implementing a digital identification program. The PSC program underscores Palau’s commitment to digital innovation and financial modernization.