• Palau has completed Phase 2a of its National Payment System, using Ripple’s XRPL technology.

• The project aims to create a cost-effective, secure payment system for Palauans, especially the unbanked.

The Ministry of Finance (MOF) of the Republic of Palau has completed Phase 2a of its National Government Payment Service Project, commonly referred to as the Palau Stablecoin Program.

According to the report, this phase, which was done in partnership with Ripple’s CBDC and Central Bank Engagement teams, was focused on identifying the possibility of a national payment system on the Ripple Blockchain Technology, especially the XRP Ledger. The project’s goal is to establish a cheap yet efficient and secure payment platform for the people of Palau, including the financially excluded and the underbanked. 

Ministry of Finance Report Reveals XRP Ledger Technology Assessment

Ripple has helped Palau establish its national payment service and assisted in researching the possibility of implementing a tokenized USD into the country’s financial system. The main objectives of the Palau Stablecoin Program are to decrease the usage of cash, decrease transaction costs, and provide an easy payment solution similar to PayPal or Alipay. 

The report from the Ministry of Finance reveals that Palau has been working with Ripple and that the XRP Ledger technology was used to assess the viability of a national payment system. This partnership has also attracted the interest of key players such as the International Monetary Fund (IMF) that has been offering technical assistance and advisory to the project. 

The second phase of the project, phase 2a, covered a number of aspects such as legal and regulatory environment, technical feasibility of the proposed infrastructure, availability of banking services and the transition from the pilot to a production system. In addition, the Ministry of Finance’s report describes the measures that have been taken to ensure that the proposed payment system will benefit all Palauans and is compliant with regulatory requirements. 

Phase 2a Evaluates Legal, Technical, and Banking Aspects

Among the key factors in this phase was the technological base for the provision of the national payment system. The report focuses on the current situation regarding internet connectivity, endpoints, and cybersecurity, underlining the need to enhance these aspects for efficient and secure transactions.

The report also evaluates banking services that can help provide collateral funds required for the development and sustenance of the payment system. 

Palau is preparing to issue its first bond issuance on the blockchain, which demonstrates the country’s commitment to enhancing its financial systems. Sources told Nikkei that the platform was developed in partnership with Soramitsu, a Japanese financial technology company.

As noted in our earlier post, more than 80% of Japanese banks have integrated Ripple into their systems as the use of digital currencies continues to rise, especially in the area of cross-border payment. Recently, Brad Garlinghouse disclosed that the company is currently involved with about 10 governments in developing CBDCs.

Additionally, earlier last year, the company revealed that it was in discussions with more than 20 countries on their CBDC plans.