UBI Program Details
The Republic of the Marshall Islands has introduced a digital wallet system designed to facilitate the distribution of Universal Basic Income (UBI) payments to its citizens. This innovative program utilizes a government-issued stablecoin, USDM1, which is pegged to the U.S. dollar.
The Lomalo wallet, as it is known, offers recipients multiple channels to receive their UBI funds. These options include direct access through the digital wallet itself, traditional physical checks, or direct bank deposits, ensuring a flexible approach to fund distribution according to the government's announcement.
David Paul, the finance minister for the Marshall Islands, emphasized that this secure digital option serves to strengthen the nation's financial systems. He also highlighted its importance in ensuring that no community is left behind or excluded from accessing these crucial funds. The first disbursement of UBI is slated for late November, at which point registered citizens will be able to begin receiving their payments through their chosen method.
A spokesperson for the finance ministry confirmed that citizens who are registered for the UBI program have the ability to transfer funds to other users of the Lomalo platform. Currently, the eligibility to establish a wallet on the Lomalo platform is restricted to individuals who are enrolled in the UBI initiative.
Regional Context and Previous Initiatives
This initiative by the Marshall Islands follows a trend observed in neighboring Pacific Island nations that have adopted blockchain-based payment systems in recent years. For instance, Palau has previously implemented a stablecoin on the XRP Ledger, which was used for the payment of government employees. Additionally, the central bank of the Solomon Islands introduced its own digital currency, Bokolo Cash, intended for peer-to-peer transactions and retail payments within Honiara.
International Monetary Fund Concerns
Despite the launch of the digital wallet system, the Marshall Islands has faced cautionary advice from the International Monetary Fund (IMF). In September, the IMF had previously cautioned the Marshall Islands government against proceeding with its plans to issue a digital sovereign bond. The fund had articulated that this initiative carried significant risks that outweighed potential returns and might not be effectively managed, considering the nation's existing capacity constraints.
In a notice issued on September 10th, the IMF pointed out that the expansion of Decentralized Autonomous Organizations (DAOs), which the Marshall Islands officially recognized as legal entities in 2022, in conjunction with the UBI program utilizing USDM1, could potentially create adverse macro-fiscal and financial integrity risks. The organization had recommended that the program be scaled back to exclusively target individuals with the greatest financial need.
Furthermore, in 2023, the IMF had urged the government to reconsider its central bank digital currency program, which was formerly referred to as SOV. The current launch of the UBI program, utilizing a stablecoin, proceeds despite these expressed concerns from the IMF regarding the untested nature of the stablecoin infrastructure and the potential for systemic risks to the island nation's financial system.