Palau, a small island nation in the Pacific Ocean, has taken a major step towards becoming a global leader in blockchain-based digital currency. The country’s Ministry of Finance has launched the second phase of the Palau Stablecoin (PSC) Program with Ripple’s CBDC platform collaboration.
The PSC Program aims to create and distribute a digital currency pegged to the U.S. dollar. The program will provide blockchain solutions for cross-border payments and remittances. Ripple’s CBDC platform, XRP Ledger (XRPL), will enable the PSC team to issue and manage the digital currency on a secure and scalable network.
PSC stands for Palau Stablecoin, a digital currency backed by one U.S. dollar at all times. The PSC is stored in commercial banks with FDIC insurance, ensuring its stability and liquidity. The Palau government issues the PSC on the XRPL, a distributed ledger technology that allows fast and low-cost transactions.
The PSC can be used for various purposes, such as online shopping, peer-to-peer transfers, donations, and more. The PSC can also be exchanged for other currencies, goods, and services at participating retailers or vendors.
The PSC Program has two phases: Phase 1 was announced on December 7, and Phase 2 was launched on December 17, 2023. In Phase 1, 168 volunteers from government employees received 100 PSCs each to use at local retailers participating in the program. In Phase 2, new collaborations will be established for marketing and sustainable development goals.
Palau’s CBDC Partnership With Ripple
Palau chose Ripple as its partner because of its expertise and experience developing CBDCs worldwide. Ripple has been working with central banks and regulators to explore the potential of blockchain-based digital currencies for enhancing financial inclusion, efficiency, transparency, and security.
Ripple also provides technical support and guidance to the PSC team on using its CBDC platform effectively and securely. Ripple’s CBDC Strategic Advisor, Anthony Welfare, shared his thoughts on the launch of Phase 2 on X (formerly known as Twitter).
The advantages of blockchain-based digital currency over traditional fiat and cryptocurrencies were emphasized regarding its welfare impact. These advantages encompass decreased transaction fees, expedited settlement durations, diminished environmental footprint, enhanced privacy safeguards, and additional benefits.
Welfare also acknowledged some of Palau’s challenges in implementing its CBDC program. He mentioned that moving traditional currencies across the 340 islands in Palau can be complex due to logistics issues. He also noted that mobile data costs are high in Palau due to limited coverage.
However, Welfare suggested that these challenges can be overcome by offline transactions with blockchain-based digital currency such as PSC. He explained that Palau residents could conduct transactions even during power outages using QR codes or NFC devices.
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