Marshall Islands Launches First Blockchain-Based UBI Using Stellar and USDM1

The Marshall Islands has started a new program that uses digital money to provide regular payments to its citizens. This system is supported by U.S. government funds and aims to offer a different way to manage public money in areas with limited financial services.

What happened

The Republic of the Marshall Islands (RMI) has initiated the world’s first Universal Basic Income (UBI) program delivered via blockchain technology, utilizing the Stellar blockchain platform and a stablecoin called USDM1. This stablecoin is pegged one-to-one with the U.S. dollar and fully collateralized by U.S. Treasury securities held in a custodial trust managed by a regulated U.S. financial institution. The RMI government partnered with a U.S.-based digital asset financial services firm to issue and oversee the USDM1 stablecoin, ensuring regulatory compliance and transparency throughout the process.

Monthly UBI payments are distributed directly to all adult citizens of the Marshall Islands through digital wallets operating on the Stellar blockchain. This approach aims to enhance financial inclusion, particularly targeting the significant portion of the population that remains unbanked or underbanked. According to statements from the RMI’s Ministry of Finance, the blockchain-based UBI system is designed to reduce dependence on traditional banking infrastructure and to strengthen sovereign control over the mechanisms of monetary transfers and social welfare distribution.

Independent assessments, including those from the Atlantic Council’s GeoEconomics Center and the World Bank’s Digital Finance Report 2025, recognize the Marshall Islands’ initiative as a pioneering integration of digital assets into sovereign public finance. These analyses highlight the potential benefits for underserved regions, such as improved transparency, accountability, and financial inclusion, while also noting some challenges related to governance and infrastructure.

Why this matters

The Marshall Islands’ blockchain-based UBI program represents a significant departure from traditional public finance models by leveraging a stablecoin asset backed by U.S. Treasury securities to directly distribute welfare payments. This design bypasses conventional intermediaries such as banks, potentially lowering transaction costs and friction in social welfare delivery. For a country with a large unbanked population, this digital infrastructure could provide a more inclusive and efficient mechanism for cash transfers.

From a sovereignty perspective, the model introduces a hybrid monetary arrangement: while the Marshall Islands retains control over the distribution mechanism and policy decisions, the backing asset is tied to U.S. government debt instruments. This linkage may have nuanced implications for the country’s monetary sovereignty. The Atlantic Council notes that although this arrangement offers transparency and security through tangible asset backing, it could expose the RMI to external financial and geopolitical risks associated with U.S. Treasury securities.

The transparent and auditable nature of blockchain transactions could also improve governance outcomes by reducing corruption risks and enhancing accountability in public welfare programs—a common challenge in many underserved regions. The World Bank’s research acknowledges these governance benefits but also emphasizes the need to address infrastructure and digital literacy challenges to realize the full potential of such programs.

What remains unclear

Despite the confirmed launch and the foundational elements of the program, several critical questions remain unanswered in the public domain. The RMI government has not disclosed how it plans to manage potential liquidity risks or fluctuations in the value of the underlying U.S. Treasury securities that back the USDM1 stablecoin, which could affect the stablecoin’s stability and, by extension, the UBI payments.

Furthermore, the specific regulatory frameworks governing the issuance and management of USDM1—both within the Marshall Islands and under U.S. jurisdiction—have not been detailed. This includes how compliance with anti-money laundering, know-your-customer, and other financial regulations is maintained.

The scalability and sustainability of the blockchain-based UBI model remain open questions, particularly if the program is expanded beyond its initial pilot phase. There is limited information on the mechanisms in place to ensure that vulnerable populations possess the necessary digital literacy and access to participate fully in this digital welfare system, which is essential to avoid inadvertent exclusion.

Lastly, the interaction between this blockchain-based UBI system and existing social welfare programs or traditional fiscal policies in the Marshall Islands has not been clarified, leaving open questions about integration, overlap, or potential policy conflicts.

What to watch next

Disclosure of the RMI government’s strategies for managing liquidity and value stability risks associated with the U.S. Treasury-backed USDM1 stablecoin.
Clarification and publication of regulatory frameworks governing USDM1 issuance and management, including cross-jurisdictional compliance measures.
Data on the program’s adoption rates among the Marshall Islands’ adult population, especially regarding digital wallet usage and accessibility.
Reports or evaluations addressing the program’s scalability and sustainability beyond the pilot phase, including any planned expansions or policy adjustments.
Initiatives to improve digital literacy and infrastructure aimed at preventing exclusion of vulnerable groups from the blockchain-based UBI system.

The Marshall Islands’ launch of a blockchain-based UBI backed by U.S. Treasury securities marks a novel experiment in sovereign public finance, blending digital innovation with traditional asset backing. While it offers promising avenues for financial inclusion and improved governance, significant uncertainties remain around regulatory oversight, monetary sovereignty, and operational sustainability. The evolving experience of the RMI will provide valuable insights for other nations considering blockchain-based social welfare solutions, but close attention to the open questions is essential for understanding its broader implications.

Source: https://www.coindesk.com/business/2025/12/16/marshall-islands-launches-world-s-first-blockchain-based-ubi-on-stellar-blockchain. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.