The Marshall Islands adopts a sovereign Token distribution for universal basic income.

Source: PortaldoBitcoin Original Title: Marshall Islands adopt cryptocurrencies to pay universal basic income Original Link: The way financial services are accessed is changing in the Republic of the Marshall Islands (RMI), as this island nation begins to utilize cryptocurrency to support its citizens.

At the end of last month, some Marshallese received paper checks through ENRA (the Marshall Islands' Universal Basic Income program), while others saw a token called USDM1 appear on Lomalo—a “citizen digital wallet” based on the Stellar blockchain, developed by the blockchain enterprise platform Crossmint.

As a fully supported sovereign token, the token generates revenue and is intended to serve as a medium of exchange for the 40,000 population of the Marshall Islands, said Paul Wong, Director of Special Projects at the Stellar Development Fund (SDF).

“Unlike stablecoins, where the issuers earn profits, in this case, the asset holders earn profits,” Wong said in an interview, describing USDM1 as essentially a money market fund.

The distinction between stablecoins and sovereign tokens may not be very relevant to Lomalo users, but USDM1 demonstrates how governments can provide digital assets with dual functions while avoiding issues such as stablecoins losing their peg.

“All they want to know is whether there is money in the account,” said Rodri Fernandez Touza, co-founder of Crossmint, in an interview, pointing out that Lomalo's design focus is on simplicity and usability.

Touza lists common features for crypto users (such as seed phrases and “weird pop-ups”) as unfeasible for the general public. Therefore, these elements do not exist in Lomalo, and Crossmint itself generates and manages user credentials.

USDM1 payments are distributed quarterly to eligible RMI citizens. This creates “opportunities in the digital economy,” Wong stated, in a country that is already dollarized and served by the United States Postal Service.

Challenges of the Marshall Islands

In the Marshall Islands, physical currency is dominant—but not necessarily by choice.

The white paper related to the launch of USDM1 describes how the country has increasingly relied on cash after several banks withdrew from the region following the global financial crisis in 2008.

The subsequent reforms changed the relationship between risk and return, leading many to conclude that maintaining a corresponding banking relationship with the Marshall Islands is not worthwhile.

Currently, the country has only one corresponding bank that provides domestic transfer services, with only a few branches on various islands. According to the document, it is not uncommon for citizens to travel long distances just to cash a check.

“If they lose this corresponding bank, the country will be disconnected from the global financial system,” Wong stated. “This tool provides an alternative.”

Money in the Container

Although the area covered by the Marshall Islands is vast and comparable in size to Mexico, the white paper emphasizes that Starlink has made internet access widely available. Nevertheless, the country still relies on physical currency, which usually arrives via shipping containers.

“Even if you want everything to be done in cash, there are many moments when economic limitations prevent people from obtaining cash,” Touza explained, pointing out that some citizens travel long distances over water just to find an empty ATM.

RMI adopts USDM1 to continue SDF's efforts to expand access to financial services in hard-to-reach areas, including those affected by geopolitical conflicts. The development of USDM1 is funded by millions of dollars in donations from SDF.

According to Wong, the SDF is currently collaborating with the German government to support payroll services for medical professionals in the Middle East. The foundation is also working with the United Nations Development Programme on several resource allocation projects.

In collaboration with UN agencies specializing in refugee work, SDF helped establish an aid distribution system in Ukraine, supporting the stablecoin USDC. SDF partnered with the Ukrainian government in 2021, which led to the creation of the payment system.

Wong stated that this work has influenced the SDF's approach in developing USDM1, including the idea of viewing each individual as the sole beneficiary of their digital funds. In practice, this may affect the long-standing social dynamics of marginalized communities.

“The risks of physical threats are much smaller,” Wong said. “When you allocate universal basic income to a woman, that money does not go into a joint account; historically, men have used it for purposes different from family welfare.”