Ripple launches CBDC pilot with Republic of Palau

Thursday 27 July 2023 13:24 CET | News

US-based blockchain company Ripple has partnered with Republic of Palau to launch a USD-backed Palau Stablecoin (PSC) on the XRP Ledger.


The US Dollar-backed Palau Stablecoin (PSC) will be issued on the XRP Ledger (XRPL), a carbon-neutral blockchain that has been used to transact millions of transactions over the course of 10 years, enabling privacy and security for settlement and liquidity of tokenized assets. The pilot programme will roll out in phases, with the first phase involving participation from about 200 government employees and local merchants in Palau.


US-based blockchain company Ripple has partnered with Republic of Palau to launch a USD-backed Palau Stablecoin (PSC) on the XRP Ledger.


Details about the project

As part of this controlled stablecoin pilot, Palau will also leverage the Ripple CBDC Platform, an end-to-end solution for central banks to issue their own central bank digital currency, as well as the technical resources to make the PSC a digital representation of Palau’s official currency, the US Dollar. The enhanced platform will now allow Palau to holistically manage and customise the entire life cycle of the stablecoin, including distribution and transactions. A stablecoin is a digital unit produced on a blockchain that maintains a fixed value.

In this case, each PSC would be valued at one US Dollar guaranteed by a 1:1 reserve in fiat currency and issued on the XRPL. The operational model follows other reserve-backed private stablecoins, such as USDC or USDT, with a notable difference for the PSC with the involvement of the Republic of Palau’s Ministry of Finance (MOF). The MOF will supervise the system and trigger the issuance and redemption of stablecoin units, while always guaranteeing the 1:1 reserve.

The President of the Republic of Palau said that by digitising their currency, they hope to mobilise their economy and government processes to improve financial transactions and empower their citizens. As a smaller country, Palau has the advantage to be innovative and nimble in releasing their stablecoin. They trust in Ripple’s long-standing expertise in CBDCs and blockchain technology, as well as the carbon neutral XRP Ledger to help create their national digital currency that will offer their citizens greater financial success.

The initial phase of the project

During Phase One of the pilot programme, Palau government employees who volunteered for the programme will receive an allotment of PSC to be used for the pilot.

The Palau Stablecoin (PSC) will bring many advantages to its citizens, merchants, and the government. These benefits include greater financial inclusion and reduced overall transaction fees for citizens. The PSC will also help reduce their currency costs, while considerably accelerating the speed of transactions.

To instil confidence for Palau citizens that the PSC is a secure and effective monetary tool that can support commercial activity in Palau, success criteria of Phase One of the controlled pilot should achieve the following:

  • The Palau Ministry of Finance (MOF) are able to securely and reliably mint, distribute, and process inbound redemptions, and destroy PSC with full control over total circulation on a 24/7 real-time basis;

  • Palau government employees are able to make purchases for goods and services at select retailers using the transfer of PSC at the point-of-sale as a means of payment;

  • Palau retailers are able to safely and securely receive & verify payments made by individuals using the PSC and are able to convert the received PSC to funds in their local bank account.

Following the success of Phase One of the pilot programme, additional phases of the Palau stablecoin will be rolled out later in 2023.

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Keywords: stablecoin, digital currency, blockchain, cryptocurrency, central bank
Categories: DeFi & Crypto & Web3
Companies: Ripple
Countries: Palau
This article is part of category

DeFi & Crypto & Web3


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