Palau Advances Stablecoin Project in Major Expansion

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The Republic of Palau is making strides toward the official launch of its national stablecoin, PSC, following the successful completion of its three-month pilot program. According to a recent report from Palau’s Ministry of Finance, the pilot was deemed successful, and the next objective is to implement PSC on a national scale, aiming to provide citizens with a secure, innovative, and cost-effective digital payment solution. The country envisions PSC as a convenient way for individuals to access their funds digitally.

Palau, an archipelago comprising over 500 petite islands in the Pacific Ocean near the Philippines, sustains a population of fewer than 20,000. Formerly a U.S. colony, it achieved complete independence in 1994, yet it continues to utilize the U.S. dollar as its official currency. A government study reveals that 70% of Palau’s economy relies on cash transactions, with 60% of the population having never utilized a mobile wallet.

The PSC (Palauan Stablecoin) is fully backed by USD deposits securely held in an undisclosed U.S. Federal Deposit Insurance Corporation (FDIC)-insured bank.

During the pilot phase, 168 volunteers from the government’s executive branch acquired the PSC at participating retailers, each receiving $100 worth of the stablecoin. The Ministry of Finance, overseeing issuance and distribution, set a maximum supply limit of $20,000. Accessible exclusively through a specialized wallet, participants couldn’t augment their holdings.

After three months, a survey revealed that most used PSC for daily transactions. Satisfaction rates were notable, with 68% expressing contentment and two in three finding the initial setup easy. The prominent advantages highlighted by participants were speed, freedom, and user-friendly operation.

In the upcoming stage, the nation aims to integrate additional participants in the payment landscape, encompassing regulators, financial institutions, and merchants.

The involvement of commercial banks in the PSC ecosystem remains uncertain, given their absence during the pilot phase. Across various countries, the challenge of bank disintermediation has prominently surfaced in the central bank digital currency (CBDC) cycle.


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