KOROR, Palau — A congressional request has prompted a critical audit of Palau’s Stablecoin Pilot Project, revealing legal oversights by the Ministry of Finance in its partnership with blockchain firm Ripple. The findings raise doubts about the project’s future, with lawmakers now holding the key to any further expansion.
The 12-page audit report by the Office of the Public Auditor, released in response to inquiries from the Olbiil Era Kelulau (Palau National Congress), found that the Ministry of Finance failed to secure required legal approvals before launching the stablecoin initiative. The digital currency, known as the Palau Stablecoin (PSC), was developed on Ripple’s XRP Ledger and aimed to enhance financial access and reduce transaction costs.
The Ministry entered into a Memorandum of Understanding (MOU) with Ripple Services Inc. in December 2022, receiving $25,000 in funding for the pilot phase. Of that amount, $14,035 was spent—primarily to reimburse three participating vendors who accepted stablecoins from 154 government volunteers during testing.
Despite the project’s intended benefits, the audit identified key legal lapses. The Ministry failed to obtain certifications from both the Attorney General and the National Director of Program, Budget, and Management. Palauan law mandates that the Attorney General certify all government agreements and the Director confirm funding availability before state resources are committed. Skipping these steps, the report noted, created legal and procedural vulnerabilities.
The Ministry of Finance defended its actions, citing legal guidance from the Office of the President. It argued that since the agreement with Ripple was an MOU and not a binding contract, it did not require formal certification. Still, the Public Auditor emphasized that all public agreements—regardless of funding source or form—must adhere to procurement and certification laws to protect public resources.
Although the audit did not uncover any misuse of funds or misconduct by officials, it highlighted the need for improved oversight and legal compliance in future technology-driven initiatives.
The broader future of the PSC remains uncertain. The audit made it clear that any transition from pilot to a fully circulating national digital currency would require formal legislation by the Olbiil Era Kelulau. Without such a law, further development or deployment of the PSC would be legally impermissible.
The last update on the project’s Phase 2a was released in July 2024, and no new public progress has been reported since. As the government weighs its next steps, the future of Palau’s stablecoin project now depends on legislative will and tighter regulatory guardrails.