The Republic of the Marshall Islands has announced that it will allow citizens to access funds through government-issued digital assets as part of the country's Universal Basic Income (UBI) program.

In an announcement shared with Cointelegraph on Wednesday, the government of this Pacific island nation stated that it has launched a digital wallet called Lomalo, which will utilize the USDM1 stablecoin pegged to the US dollar, enabling citizens to access funds from the UBI program. According to the government, the first disbursement of funds will take place in late November, allowing citizens to receive funds via the wallet, physical checks, or direct deposits.

Marshall Islands Finance Minister David Paul stated, "By introducing secure digital options beyond traditional methods, we are strengthening the financial system and ensuring that no community is left behind."

Nearby Pacific island nations have also launched similar programs in recent years, including Palau's stablecoin for government employees on the XRP ledger and the Central Bank of the Solomon Islands' Bokolo Cash for peer-to-peer transactions and retail payments in the capital Honiara.

A spokesperson for the Marshall Islands Finance Minister told Cointelegraph, "Citizens will be able to transfer funds to other registered Lomalo users. Currently, only citizens registered for UBI can set up a wallet."

Before the launch of the digital wallet as part of the island nation's UBI program, the International Monetary Fund (IMF) had issued a warning. In 2023, the organization urged the Marshall Islands government to reconsider its central bank digital currency plan, which was then known as SOV.

In a notice dated September 10, the IMF stated, "We welcome the progress made in retracting past digital initiatives. The current plan to issue 'digital sovereign bonds' carries significant risks relative to expected returns, and these risks cannot be effectively mitigated given the lack of necessary capacity. Therefore, the delegation believes that the authorities should not proceed with the global issuance as planned."

The IMF indicated that the expansion of decentralized autonomous organizations (DAOs) (which the Marshall Islands began recognizing as legal entities in 2022) and the use of the "untested" USDM1 to launch the UBI program could have "adverse macro-fiscal and financial integrity implications." The fund urged the government to scale back the UBI program to "a more targeted initiative aimed at those most in need."

In response to the IMF's warning, Paul told Cointelegraph that the Marshall Islands government is "engaging in active dialogue with the IMF regarding the UBI program and USDM1," and that the digital sovereign bonds "are issued under New York law and are backed 1:1 by short-term U.S. Treasury securities held in a bankruptcy-remote account by a U.S. qualified custodian."

Paul stated, "The legal structure, enforceability, and redemption mechanism of USDM1 align with the IMF's long-standing approach to collateralizing sovereign debt rather than privately issued digital tokens. This tool is intentionally designed to mirror the Brady-style framework historically supported by the IMF."

Related: Driving the Digitalization of African Trade with Blockchain and Stablecoins

Original article: “Marshall Islands Launches Universal Basic Income (UBI) Program Using Digital Wallet”

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