Palau has signed up with Ripple, a crypto and blockchain enterprise that provides cross-border payments, to “explore using the XRP Ledger to create world’s first government-issued national stablecoin” or Palau’s first national digital currency.
The press release issued by both Ripple and the Office of the President of Palau says that “this could see the implementation of the world’s first government-backed national stablecoin in the first half of 2022.”
“The first phase of the partnership will focus on a cross-border payments strategy and exploring options to create a national digital currency, providing the citizens of Palau with greater financial access,” stated President Surangel Whipps Jr. in the press release.
Whipps had said in his earlier statements that he wanted to see Palau take advantage of the financial technologies to diversify and transform its economy.
However, the announcement of the partnership comes before the two pending legislations, the Digital Residency bill and the Exempt Corporation bill, both calling for a “Private Partner” to partner up with the government, are enacted. Digital Residency bill passed the Senate and is still in the House while the Exempt Corporation bill is still in the Senate. Both bills call for securing the services of a “Private Partner” who will contract with the Palau government under the Operating Agreement.
Both the Digital Residency bill and Exempt Corporations bill do not explicitly talk about creating the first digital currency for Palau, but the digital residency bill allows for chartering of digital banks, digital securities brokers, digital securities dealers or otherwise referred to as “digital institutions” created under the “Operating Agreement” which is to be an agreement between Palau and the “Private Partner”. Under the Exempt Corporation bill, Exempt Corporations are exempted from complying with Financial Institutions Act Title 26 which covers companies selling, acquiring, or managing securities.
Press release issued by Ripple said, “Ripple would provide Palau with technical, business, design and policy support. Meanwhile, exploring a USD-backed stablecoin and associated use cases —such as a corporate registry— on the XRP Ledger could provide a viable alternative to central bank digital currencies (CBDCs) for countries like Palau.”
Consequently, Ripple is in a legal battle with United States’ Security Exchange Commission (SEC) over claims that Ripple sold $1.3 billion worth of its digital coin XRP in violation of securities laws for failing to register the sales with the commission and disclosing to investors, a claim Ripple is challenging saying they were not selling securities and therefore, did not need to register with the commission.
Digital currency or cryptocurrency and its related platforms are growing rapidly worldwide with a valuation exceeding $3 trillion today compared to $400 billion in 2018. This was designed as an alternative to avoid heavily regulated finances such as banks.
The specifics of the MOU signed between Palau’s President Whipps and Ripple are not known other than what’s stated in the press release issued simultaneously by both the Palau government and Ripple. Ripple may or may not be the “Private Partner” referred to in both legislation pending but what is clear is that they will be working with Palau to create the “world’s first government-backed national stablecoin.”