Palau’s Ministry of Finance released a detailed report on the first phase of its groundbreaking Ripple-based stablecoin program on Dec. 7.
The country conducted the pilot project with Ripple’s Central Bank Digital Currencies (CBDC) and Central Bank Engagements teams. The program additionally used Ripple’s CBDC platform on a technical level.
Palau said that it launched the pilot program in June 2023 and closed the program in September 2023. The program allowed up to 200 employee volunteers from Palau’s executive branch of government to make purchases from local retailers, though statistics indicate that only 168 individuals participated.
The pilot program saw several restrictions. No more than $20,000 worth of digital currency entered circulation. Volunteers could not obtain additional digital currency, non-selected users could not obtain the stablecoin, and only participating local retailers could redeem the stablecoin for U.S. dollars.
The country’s Ministry of Finance issued the relevant tokens on the XRP Ledger and collateralized those funds with U.S. dollar deposits held in a U.S. FDIC bank.
Volunteers and retailers both satisfied
Palau’s Ministry of Finance collected data and surveyed the program. Those results found a high degree of satisfaction, as 31.7% of respondents rated the experience as good, and 36.6% rated the experience as excellent.
Furthermore, 58% of respondents described setting up and using the wallet for payment as easy or very easy. However, many reported issues during payments: half of respondents described slowness during wallet use or payment processing or problems with QR code usage and manual address input.
The Ministry of Finance described the first phase of the program as a “success among both volunteers and retailers.” It said that future phases should focus on creating a larger ecosystem using stablecoin and establishing a legal framework. It said that in the long term, it intends to introduce the stablecoin “nationally as a convenient and cost-effective way of payment.”
Palau is also known for another cryptocurrency initiative. Its digital residency program allows users to obtain identity cards for $248. This provides access to certain services, including crypto services, but not citizenship status.
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