Palau Makes Waves with Ripple: Groundbreaking Stablecoin Pilot Soars in Phase 1 Report

By Aaron Feuerstein December 08, 2023 In CBDCs, Ripple
Source: Adobe Stock
  • Palau, a small island country in the western Pacific Ocean known for its natural beauty, has partnered with Ripple to trial a digital currency (stablecoin) pegged to the US dollar.
  • The Palau Stablecoin (PSC) aims to simplify and lower the cost of financial transactions, enhance accessibility to financial services among other use cases.
  • Officials expressed satisfaction with the first phase of the Palau Stablecoin Program, which was positively received by volunteers and retailers.
  • Future phases will focus on creating an integrated ecosystem with legal and regulatory compliance to ensure a stable digital dollar operation.

A Pioneering Endeavour for A Small Island State

Palau, a tiny Pacific nation, consists of around 340 islands in the Caroline Islands chain, Micronesia, covering 459 square km. Located southeast of the Philippines, east of Indonesia, and north of Papua New Guinea, Palau is renowned for its spectacular natural landscapes, including dense forests, beautiful beaches, and diverse marine life, attracting many tourists, particularly divers.

The Republic of Palau and Ripple are cooperating in a stablecoin trial using the Ripple CBDC Platform. This initiative allowed Palau to issue a digital currency pegged 1:1 to the US dollar and managed on the XRPL. The Ministry of Finance (MoF) oversaw the trial, ensuring regulation and stability. President Surangel S. Whipps, Jr. supported the move to digitise the local currency, aiming to enhance financial transactions and empower residents.

Source: Ministry of Finance, Republic of Palau

Why Does Palau Need a Stablecoin and How Does it Work?

The Palau MoF believes a stablecoin is needed to “simplify and reduce the cost of financial transactions” in Palau. The Palau Stablecoin (PSC) is a digital asset pegged to the U.S. Dollar, used through a digital wallet. Its introduction aims to make financial services more accessible, especially to “under-served communities and socio-economic groups,” by lowering transaction costs such as cash transfer and credit card payment fees. Additionally, the use of PSC is seen as a way to reduce energy consumption associated with the physical transport of currency, thus helping to decrease Palau’s carbon footprint.

No bank account is necessary for citizens to use the Palau stablecoin. This will facilitate greater financial inclusion for those who have been unable to open a bank account. With a Stablecoin, money transfer can happen without the sender and the recipient being in the same physical location.

Ministry of Finance Republic of Palau

Phase One Concludes

Jay Hunter Anson, a cybersecurity consultant involved with the Palau Digital Residency Office & Stablecoin Program, conveyed his pleasure in sharing the initiative, highlighting Palau’s dedication to embracing technological advancements and strengthening economic resilience.


The report shows that Phase 1 of the Palau Stablecoin Program was well-received by volunteers and retailers, with many survey respondents supporting its use in a national deployment.

Cash trumps credit card and mobile payments, source: Ministry of Finance Republic of Palau

Future phases will focus on developing an integrated ecosystem involving financial institutions, regulatory bodies, and users, to ensure the stable operation of a digital dollar. This will include a strong emphasis on legal and regulatory compliance, aiming to establish a secure, transparent framework for transactions.

Retail use dominating PSC usage, source: Ministry of Finance Republic of Palau

The program aims to expand its reach, educate about its benefits, and ultimately implement the PSC nationally as a convenient, cost-effective payment method, offering innovative and secure financial transactions without the need for physical banking or high fees associated with traditional payment systems.

Aaron Feuerstein

Aaron Feuerstein

Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.

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