Ripple And The Republic of Palau Partner to Create a Digital Currency
The Pacific island nation of Palau has partnered with San Francisco-based blockchain payments company Ripple on a U.S. dollar-backed digital currency for the country — the world’s first government-based national stablecoin — using the XRP Ledger, according to a Ripple announcement.
Ripple will provide Palau with technical, business, design and policy support for Palau’s national stablecoin. “Palau chose Ripple because of its extensive experience in blockchain and building global payment systems, and the XRP Ledger because it’s carbon-neutral and 120,000x more energy-efficient than proof-of-work blockchains,” said Ripple in its announcement.
“As part of our commitment to lead in financial innovation and technologies, we are delighted to partner with Ripple,” said Surangel S. Whipps Jr., president of Palau. “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.”
A U.S. dollar-backed stablecoin and related use cases — such as a corporate registry — on the XRP Ledger could be an alternative to central bank digital currencies (CBDCs), Ripple said.
Palau, a group of over 300 islands in the Micronesia region of the western Pacific Ocean, is renowned for its beautiful island scenery. The country has a population of 22,000 and GDP of US$268 million, according to World Bank data.
Ripple’s latest partnership with Palau comes amid its legal troubles in the United States where it is deeply embroiled in a lawsuit with the U.S. Securities and Exchange Commission over an alleged unregistered securities offering of XRP worth over US$1.38 billion. Following the lawsuit, which saw U.S.-based cryptocurrency exchanges and partners such as MoneyGram suspend XRP trading and cease their partnerships, the company has expanded its business for the XRP Ledger technology not just outside the U.S. but also beyond digital payments and remittances to central bank digital currencies (CBDCs) including with Bhutan, tokenization, decentralized finance (DeFi) and NFTs.
XRP, the native token of the XRP Ledger, is currently ranked the seventh-largest cryptocurrency with a market value of US$49 billion, according to CoinGecko data.
The Republic of Palau wants to explore digital money, and chose Ripple as the best partner to work on a a government-backed USD-pegged stablecoin.
Despite the problems, Ripple has not given up on its mission to become a significant player in the global payments industry, and even though things are not going so well with the United States, one country is looking at the company as the best option to develop a domestic currency based precisely on U.S. dollars: Palau.
According to a Press Release shared by Ripple, Palau chose the XRP Ledger to create digital dollars to circulate internally in the country. The idea, Ripple explains, is to design a USD-backed stablecoin around which could be developed other services like corporate registries.
Palau is Ripple-Friendly —But Not Enought To Adopt XRP
Palau does not have a fiat currency of its own. Like El Salvador, citizens use the U.S. dollar as legal tender. However, the small island located in Oceania does not want to adopt XRP or any cryptocurrency as legal tender but hopes to issue a government-managed digital version of the U.S. dollar.
In this sense, Palau’s initiative looks more like the issuance of a stablecoin than a CBDC. And it makes a lot of sense, given that Palau does not have a Central Bank.
Palau’s president Surangel S. Whipps Jr was confident that Ripple could provide the technology necessary to develop a financial product tailored to Palau’s needs.
“As part of our commitment to lead in financial innovation and technologies, we are delighted to partner with Ripple. 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.”
Ripple maintains an efficient, carbon-neutral, fast, and cost-effective blockchain network. The note shared by Ripple explains that the XRP Ledger would give Palau the ability to fully settle transactions in less than 5 seconds at a cost that doesn’t even reach a penny on the dollar per transaction.
Ripple’s Regulatory Problems
The news seems to have done little to none for the price of XRP, the native cryptocurrency of Ripple’s XRP Ledger.
Following the July 2021 surge, XRP corrected nearly 34% in a matter of 3 weeks, falling from the $1.4 mark to lows of $0.86. From there it has been trading sideways, unable to definitively break the $1.2 resistance nor the support in the $1 area.
During November 23, XRP recorded a 2.97% rise from $1.03 to $1.06. However, its current price of $1.045 represents a drop of almost 2%, again demonstrating the token’s lack of trend.
Much of this hesitancy is likely due to Ripple’s regulatory problems.
Currently, the SEC has sued the company, accusing it of selling XRP as an unregistered security. Ripple is defending itself, but the case has proved to be a major blow to its reputation – and consequently that of its XRP token.
The XRP token, which once ranked in the Top 3 by market capitalization, is currently at number 7, and the token’s once-dominant fan community, the XRP Army, is now all but dead on Crypto Twitter.