The Time for Progress is Now

Republic of Palau Launches US Dollar-backed Palau Stablecoin in the Next Phase of Collaboration with Ripple on the XRP Ledger

Ripple will provide the CBDC Platform and technical resources in a Controlled Pilot

The Republic of Palau and Ripple have launched a limited stablecoin pilot. Palau and Ripple, the leader in enterprise blockchain and crypto solutions, started collaborating on exploring potential use cases in 2021. The U.S. Dollar-backed Palau Stablecoin (PSC) will be issued on the XRP Ledger (XRPL), a carbon-neutral blockchain that has been used to transact millions of transactions over the course of 10 years, enabling privacy and security for settlement and liquidity of tokenized assets. The pilot program will roll out in phases, with the first phase involving participation from about 200 government employees and local merchants in Palau. 

As part of this controlled stablecoin pilot, Palau will also leverage the Ripple CBDC Platform, an end-to-end solution for central banks to issue their own central bank digital currency, as well as the technical resources to make the PSC a digital representation of Palau’s official currency, the U.S. Dollar. The enhanced platform will now allow Palau to holistically manage and customize the entire life cycle of the stablecoin, including distribution and transactions. A stablecoin is a digital unit produced on a blockchain that maintains a fixed value. 

In this case, each PSC would be valued at one U.S. Dollar guaranteed by a 1:1 reserve in fiat currency and issued on the XRPL.The operational model follows other reserve-backed private stablecoins, such as USDC or USDT, with a notable difference for the PSC with the involvement of the Republic of Palau’s Ministry of Finance (MOF). The MOF will supervise the system and trigger the issuance and redemption of stablecoin units, while always guaranteeing the 1:1 reserve.

“By digitizing our currency, we hope to mobilize our economy and government processes to improve financial transactions and empower our citizens. As a smaller country, Palau has the advantage to be innovative and nimble in releasing our stablecoin,” said President of the Republic of Palau, Surangel S. Whipps, Jr. “We trust in Ripple’s long-standing expertise in CBDCs and blockchain technology, as well as the carbon-neutral XRP Ledger to help create our national digital currency that will offer our citizens greater financial success," the President added. 

“Ripple is honored to work with the Republic of Palau on implementing their stablecoin to help Palau accelerate their business growth by providing a single source for producing and managing digital currency,“ said James Wallis, VP of Central Bank Engagements for Ripple. "Palau is a Pacific Island nation comprising over 200 volcanic and coral islands, filled with unique wildlife and vegetation. Launching the Palau Stablecoin will help the island reduce their carbon footprint and their vulnerability to the impacts of climate change.”

During Phase One of the pilot program, Palau government employees who volunteered for the program will receive an allotment of PSC to be used for the pilot. 

The Palau Stablecoin (PSC) will bring many advantages to its citizens, merchants and the government. These benefits include greater financial inclusion and reduced overall transaction fees for citizens. The PSC will also help reduce their currency costs, while considerably accelerating the speed of transactions. 

To instill confidence for Palau citizens that the PSC is a secure and effective monetary tool that can support commercial activity in Palau, success criteria of Phase One of the controlled pilot should achieve the following: 

  • The Palau Ministry of Finance (MOF) are able to securely and reliably mint, distribute, and process inbound redemptions, and destroy PSC with full control over total circulation on a 24/7 real-time basis.
  • Palau government employees are able to make purchases for goods and services at select retailers using the transfer of PSC at the point-of-sale as a means of payment.
  • Palau retailers are able to safely and securely receive & verify payments made by individuals using the PSC, and are able to convert the received PSC to funds in their local bank account.

Following the success of Phase One of the pilot program, additional phases of the Palau stablecoin will be rolled out later in the year. To learn more about the Palau Stablecoin Project, refer the the FAQs posted online: