Historical solution: How the Marshall Islands are changing benefit distribution through blockchain technology

An island nation in the Pacific has taken a revolutionary step in reforming its financial system by introducing digital debt instruments USDM1 for distributing a universal basic income program. Instead of four annual cash payouts, Marshall Islands residents now receive instant digital currency transfers via the Stellar network. This is the world’s first implementation of such a system by a government, marking a breakthrough in the practical application of blockchain technology for resource redistribution.

System architecture based on sovereign securities

Each digital unit of the USDM1 system is fully backed by short-term U.S. government securities held in an independent escrow account. This structure draws on the Brady framework, which has been operating in the international sovereign debt market for decades. The Marshall Islands Ministry of Finance collaborated with the Stellar Development Foundation and a specialized firm, Crossmint, to implement this mechanism.

The Lomalo wallet app, developed on demand, allows users immediate access to funds through accounts stored on the Stellar platform. The system’s security is guaranteed by binding legal agreements, not administrative decisions—the terms of bond redemption have full legal force and cannot be unilaterally changed.

System upgrade: From cash to digital flows

The modernization involved the existing resource redistribution program (ENRA). The previous method required physical transportation of cash to dispersed islands, posing logistical challenges. Communities separated by ocean had limited banking branches, and the distance between population centers complicated access to financial services.

Stella Development Foundation CEO Denelle Dixon noted that blockchain technology solved previous delivery issues across the archipelago. The new system enables instant transfers without traditional geographical limitations.

Monetary sovereignty without compromises

Officials from the ministry emphasize that the new infrastructure does not replace traditional currency nor infringe on monetary sovereignty. ENRA functions as a fiscal distribution mechanism—each payment unit remains directly linked to treasury bonds and supported by funds on an external escrow account, entirely outside government and private institution control.

The multi-year process of developing the system took into account the specific operational needs of the Marshall Islands. The blockchain solution proved crucial in overcoming infrastructural barriers while maintaining compliance with existing legal frameworks for sovereign debt instruments.