Island Nation Palau Puts Digital Savings Bonds on Blockchain

The government of Pacific Island nation Palau is testing out a blockchain-based savings bond system in a bid to raise capital to fund critical infrastructure projects on its islands.

A public review of the digital savings bond platform began this week, although no bonds have been issued, project backer Japanese blockchain solutions firm Soramitsu said in a statement Tuesday. Funds raised from the bonds will go toward the construction of bridges, roads, and other public infrastructure projects across Palau’s more than 300 islands.

"The savings bonds initiative allows us to fund crucial projects like housing, small and medium enterprise development, and infrastructure with domestically sourced capital,” Palau President Surangel Whipps Jr. said Tuesday in a statement. 

“By investing in these areas, we stimulate job creation, enhance business opportunities, and foster a vibrant economy," he added.

The platform runs on the SORA v3 Hub Chain's Hyperledger Iroha 2-based network. It was developed in partnership with Japan's Ministry of Economy, Trade, and Industry (METI). 

Palau aims to fully launch the digital savings bond system in 2025. When the platform goes live, the roughly 18,000 Palauans will be eligible to purchase bonds from the Palau Finance Ministry using an app on their phones. 

It is unclear how long the digital savings bond platform's public review will last. Neither Soramitsu nor the Palau Finance Ministry immediately responded to Decrypt's requests for comment.

The Palau Finance Ministry must finalize its bond issuance criteria, in addition to securing government approval before officially rolling out the digital savings bond platform. 

Palau uses the United States dollar as its national currency, and it has no bond platform as of publication time, according to Soramitsu. 

Palau has previously dipped its toes into the world of cryptocurrencies and blockchain technology. In 2021, the Palau government launched a dollar-pegged stablecoin project with Ripple. And, in July, the country began deploying digital residence IDs on Solana.

Edited by Andrew Hayward