The Republic of Palau and Ripple have taken a significant step toward the future of digital currency with the launch of their limited stablecoin pilot. The partnership began in 2021 and aimed to explore potential use cases for the Palau Stablecoin (PSC), linked to the U.S. Dollar, on the XRP Ledger (XRPL). The XRPL is a carbon-neutral variant of a blockchain using the so-called decentralized ledger technology known for its secure and private transactions, making it an ideal platform for settling and providing liquidity to tokenized assets.
As per Businesswire reporting, the pilot program, which will be implemented gradually, will involve the participation of roughly 200 government workers and local business owners. Palau will use the Ripple CBDC Platform, an end-to-end solution created to assist central banks in issuing their digital currencies, as part of this regulated stablecoin trial. Thanks to the platform, Palau will also be able to control and tailor all aspects of the stablecoin’s life cycle, including distribution and transactions.
A stablecoin is a digital asset pegged to a commodity or currency, maintaining a stable price; in the case of PSC, it will be issued on the XRPL with a 1:1 reserve in USD. The Republic of Palau’s Ministry of Finance (MOF) will oversee the trial, closely monitor it around the clock, and remain responsible for issuing and redeeming stablecoin units.
Surangel S. Whipps, Jr., president of the Republic of Palau, declared his support for digitizing the local currency. He said that it would enhance financial transactions and give residents more authority.
He said, “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 staff of the Palauan government who volunteer for the project will get an allocation of PSC for usage during the pilot during the program’s first stage. The Palau Stablecoin is expected to bring numerous benefits to citizens, merchants, and the government alike. These advantages include greater financial inclusion, reduced transaction fees for citizens, and decreased currency costs, ultimately resulting in faster transactions.
The controlled pilot’s Phase One must satisfy specific requirements for the PSC to succeed and win the people’s trust of Palau. The MOF must be able to create, distribute, handle incoming redemptions, and eliminate PSC while retaining complete control over its total circulation at all times on a real-time basis, 24/7. Government employees should be able to make purchases using PSC at select retailers, and these retailers should be able to safely receive, verify payments made with PSC, and convert them into funds in their local bank accounts.
Ripple also highlights other benefits to the trial, going beyond financial inclusion and the cost of currency and fast transactions.
“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 vulnerability to climate change’s impacts.” James Wallis, VP of Central Bank Engagements for Ripple, said in a statement.
The successful implementation of Phase One will pave the way for subsequent phases of the Palau Stablecoin, which are planned to be rolled out later this year. The introduction of the PSC represents a significant advancement for Palau as it embraces the potential of blockchain technology and digital currencies, positioning itself as a pioneer in the blockchain frontier while preserving its unique natural beauty and culture as an island paradise.