Setting a digital currency trend in the region, Palau is slated to launch a dry run of its stablecoin in October, according to Kaleb Udui Jr., the country’s finance minister.
“Initially, we are starting a very small pilot program,” Udui said. “It’s a very controlled launch, with only government people involved in the pilot, so we control what they do.”
Once fully rolled out, the stablecoin will allow Palauans to purchase goods in local shops or conduct local transactions using their phones in the same way PayPal operates, Udui said.
“The stablecoin is meant to provide more access to financial technology,” Udui said, speaking at the Pacific Judicial Conference at Dusit Thani Resort on Guam.
“Basically, what it means for us is being able to take your dollar and digitise it. It is basically a digital representation of whatever dollar you have in your pocket,” Udui said.
The process involves linking the bank account to a stablecoin account.
“Meaning, you are already vetted through your bank. If the bank trusts you, then we trust you,” Udui said. “The stablecoin is on the blockchain, so the computer assigns the number and address to your transactions.”
Palau has teamed up with Ripple on the U.S dollar-backed digital currency programme using the XRP Ledger.
“I know the name (Ripple) raises concerns to a lot of people,” Udui said.
In 2020, the Securities and Exchange Commission filed an action against Ripple Labs Inc. and two of its executives, alleging that they raised over US$1.3 billion through an unregistered, ongoing digital asset securities offering.
But Udui said Ripple “is not just one company. We are working with a subsidiary that deals with a central bank currency. We don’t have a central bank and we’re doing something like what a central bank does.”
Udui said Palau’s stablecoin is government-controlled and “not just some company creating this thing and doing business in Palau under the stablecoin using blockchain.”
The initial rollout of the stablecoin will be exclusive to local residents’ domestic transactions, Udui said.
“Later on, when we see the potential for using Palau stablecoin with tourists, maybe in the future, we will use this as a way to transfer money to different places,” Udui said. “It’s a cheaper way to transfer money through banks.”