Palau, a country in the Western Pacific Ocean, is stopping the Palau Stablecoin project after initiating a pilot program in August. Palau Stablecoin, built on Ripple‘s XRP Ledger, aimed to reduce transaction costs and increase transfer speed, but due to issues encountered during the pilot phase, the project will be suspended.
Pilot Project to be Suspended
Jay Hunter X, member of the Palau Ministry of Finance and president of the digital residency program, announced that the government will halt the distribution of Palau Stablecoin (PSC) on September 8. Hunter stated that after the distribution is stopped, Palau Stablecoin will be frozen and cannot be spent by users after September 15:
“You will no longer be able to spend PSC after September 15. This will allow us to process retail redemptions before officially ending the pilot test at the end of the month.”
Hunter did not specify the exact reasons for freezing the stablecoin, only mentioning that the government will send a survey to pilot participants in the following week. This move comes weeks after the government launched PSC at the end of July. The official stated that user feedback will be crucial in developing the final report for the Palau Congress and the president, and continued:
“If we have the authority to move on to the next phase of the stablecoin program, the collective lessons we learn will shape the path ahead.”
18 Issues Identified During the Pilot Phase
The news came shortly after Hunter published a study dedicated to stablecoin technology and related security issues from the National Institute of Standards and Technology. The study, released in September, evaluated some necessary features of security and stability and identified 18 potential issues in stablecoin applications.
Palau Stablecoin, also known as Kluk, was designed to reduce transaction costs and increase the speed of transfers for citizens, investors, and the Palau government. The stablecoin was built on Ripple’s XRP Ledger, a platform focused on the issuance of central bank digital currencies (CBDC). The XRP Ledger CBDC platform also serves as the foundation for similar pilot projects in countries such as Hong Kong, Bhutan, Colombia, and Montenegro.
