Surangel Whipps Jr.
KOROR (Island Times/Pacnews) — A new bill introduced by Palau President Surangel Whipps Jr. seeks to create a government-backed digital payment system in Palau, aiming to reduce reliance on expensive credit card networks and make everyday payments faster and cheaper.
Senate Bill No. 12-35, would allow people to use a new kind of digital money called “tokenized dollars.”
These would work just like U.S. dollars — the country’s official currency — but in digital form. Users would keep their tokenized dollars in a secure app called a “digital wallet” and use them to pay for goods, services, and government fees.
President Whipps said the system would lower costs for small businesses and families, reduce the fees Palau pays to foreign banks, and help bring more people into the formal economy.
“This is about making payments easier, faster, and more affordable for everyone,” Whipps said in support of the plan.
The proposal builds on a recent pilot project that tested Palau’s government-issued digital currency, known as the Palau Stablecoin. But some lawmakers are now questioning the timing and readiness of the bill — especially after a recent audit of the pilot revealed problems that shook public trust.
A government audit of the Palau Stablecoin pilot found several issues, including weak internal controls, inadequate documentation, and a lack of oversight. The audit also raised questions about how funds were managed and whether legal safeguards were followed.
Those findings have made some lawmakers hesitant to move forward.
“If the pilot couldn’t be properly managed, how can we be sure this full-scale version will be any better?” one lawmaker said of the proposal.
Under the proposed bill, the Ministry of Finance would be responsible for creating and managing the digital system. Every tokenized dollar would be backed by a real U.S. dollar kept safely in a government-controlled account. People could buy tokenized dollars and use them through a phone app, and the money would be accepted at government offices and by participating businesses.
The system also allows for private companies to help build or run parts of the program, under the Ministry’s supervision.
The bill includes a number of protections, including:
• A promise that people can trade their tokenized dollars back into cash at any time.
• A requirement that all user data remains private and cannot be sold or misused.
• Monthly reports and regular audits to keep the system transparent.
For the first two years, the government could offer small rewards — like discounts on fees or $5 bonuses — to encourage people to try the new system.
Despite the bill’s promise, several important details remain unclear:
Who watches the watchers? The bill lets the Ministry work with private partners, but doesn’t explain how those partners will be chosen or how the government will prevent conflicts of interest.
Where is the data stored? The bill says personal and financial data can be stored outside Palau, in places approved by the Ministry, but it doesn’t say what makes a country “approved.”
Is it really optional? The bill says people don’t have to use tokenized dollars, but it also says all government agencies must accept them — raising questions about how optional it really is.
What happens after the incentives end? The law allows for small rewards for using the system in the first two years, but offers no plan for how the system will stay popular or self-sustaining afterward.
The bill is now under review by the Olbiil Era Kelulau, Palau’s national legislature. Lawmakers are expected to hold further hearings to discuss the audit findings, system security, and public education needs before deciding whether to pass the bill.
Supporters say the system could modernize Palau’s economy and reduce its dependence on foreign banks. Critics argue that the government must first rebuild public trust and address the weaknesses exposed in the stablecoin audit.
Either way, the future of Palau’s digital currency is now in the hands of its lawmakers.
