Tiny Palau seeks to blaze trail with official cryptocurrency – Al Jazeera English
Palau – population roughly 18,000 – is unlikely to be at the top of many people’s minds when they think of places at the cutting edge of technological innovation.
But the tiny Pacific island nation, located about 900km (559 miles) west of the Philippines, is on a bold mission to spearhead the official adoption and endorsement of cryptocurrencies.
Under a partnership with United States-based cryptocurrency company Ripple, Palau is exploring plans to launch the world’s first government-backed national stablecoin in the first half of 2022.
Pegged to a real-world currency
While running on the same digital ledger technology, or blockchain, as other cryptocurrencies, stablecoins differ from other digital currencies in having their value pegged to a real-world asset such as the US dollar. For stablecoin proponents, that gives the digital currencies an edge over notoriously volatile cryptos such as Bitcoin, whose price has swung between $5,000 and $65,000 in the last 20 months alone.
Palauan President Surangel Whipps, Jr has touted the adoption of a stablecoin as a way to make life more convenient for citizens and diversify the economy away from tourism, which before the pandemic accounted for about half of gross domestic product (GDP).
Palau’s GDP shrank by 8.7 percent last year, with a further contraction of 17.6 percent expected in 2021, according to a report by the Graduate School USA, largely due to the collapse of travel due to COVID-19.
The Asian Development Bank in April granted the country a $25m loan to keep it afloat.
Ripple, which is based in San Francisco, has pledged to work with Palau to explore “a USD-backed stablecoin”, strategies for cross-border payments and other features using its XRP Ledger such as a corporate registry.
In a media briefing last week, Whipps said he envisaged citizens purchasing goods in shops with their phones and government employees receiving their salaries instantaneously instead of waiting days for the transaction to go through at their bank.
“Why not make it that simple?” Whipps told local reporters.
“Having a digital currency in some ways kind of eliminates the need for a bank,” he said. “You know, it makes it so everybody’s their own bank.”
Some advocates see digital currencies as a way to empower people who lack access to banking services [File: Shannon Stapleton/ Reuters]
‘At the mercy of the inflation of the US dollar’
Under the plans, which remain in the early stages following the signing of a memorandum of understanding last month, Palau’s digital currency would be backed by the US dollar.
Palau, which is an independent country but relies on the US for aid and …….