At a Glance
- The Republic of the Marshall Islands is enabling citizens to access Universal Basic Income (UBI) funds via a government-issued digital asset.
- A digital wallet named Lomalo has been launched, utilizing the US dollar-pegged stablecoin USDM1 for UBI disbursements.
- The first UBI fund distribution is scheduled for late November, offering access through the digital wallet, physical check, or direct deposit.
- This initiative follows similar digital asset programs in neighboring Pacific island nations.
- The International Monetary Fund (IMF) has previously raised concerns regarding some of the Marshall Islands’ digital asset initiatives, citing potential risks.
Marshall Islands Launches Digital Asset for UBI Program
The Republic of the Marshall Islands has announced a significant step in its Universal Basic Income (UBI) program by allowing citizens to access funds through a government-issued digital asset. This move aims to modernize financial access for its population.
The nation has introduced a digital wallet called Lomalo. This platform will leverage the USDM1 stablecoin, which is pegged to the US dollar, to facilitate the distribution of UBI payments. According to government statements, the initial disbursement of funds is planned for late November. Citizens will have the option to receive their UBI through the Lomalo digital wallet, traditional physical checks, or direct bank deposits.
“By introducing a secure digital option alongside our traditional methods, we are strengthening our financial systems and ensuring that no community is left behind,” stated David Paul, the finance minister for the Marshall Islands. This approach seeks to provide flexibility and inclusivity in accessing government benefits.
The capability extends to peer-to-peer transfers within the Lomalo system. A spokesperson for the finance minister’s office clarified that currently, only citizens registered for the UBI program are eligible to set up a Lomalo wallet.
Regional Adoption of Digital Financial Tools
The Marshall Islands’ initiative aligns with a broader trend observed in neighboring Pacific island nations, which have been exploring and implementing various digital asset programs. These efforts often aim to enhance financial inclusion and streamline economic activities within their communities.
For example, Palau previously launched a stablecoin project on the XRP Ledger, primarily for government employees. Another initiative includes the Solomon Islands’ central bank, which introduced Bokolo Cash to support peer-to-peer transactions and retail payments within its capital city, Honiara.
IMF’s Prior Concerns Regarding Digital Initiatives
The launch of Lomalo and its role in the UBI program comes after the International Monetary Fund (IMF) voiced concerns regarding the Marshall Islands’ engagement with digital assets. In 2023, the IMF had advised the government to reassess its plans for a central bank digital currency (CBDC), which was then referred to as SOV.
An IMF notice on September 10 stated: “Progress on rolling back past digital initiatives is welcome. Current plans to issue a ‘digital sovereign bond’ carry significant risks relative to perceived returns, which cannot be effectively mitigated given lack of pre-requisite capacity. Thus, in the mission’s view, the authorities should not proceed with the global launch as planned.”
The IMF highlighted potential adverse macro-fiscal and financial integrity implications stemming from the expansion of Decentralized Autonomous Organizations (DAOs), which the Marshall Islands began recognizing as legal entities in 2022, and the introduction of the UBI program utilizing the USDM1 stablecoin. The fund recommended that the government consider scaling back the UBI program to a more targeted approach, focusing on those most in need.
Expert Summary
The Marshall Islands has introduced a digital wallet, Lomalo, using the USDM1 stablecoin to disburse UBI funds, following regional trends in digital finance. While aiming for broader financial access, the initiative has occurred amidst prior warnings from the IMF regarding the risks associated with digital asset programs in the nation.