ubi-using-stellar-and-usdm1">Marshall Islands Uses Stellar to Test Crypto for Universal Basic Income

The Marshall Islands is piloting a universal basic income (UBI) program using the Stellar blockchain to deliver payments directly to citizens, bypassing traditional banking infrastructure. This initiative seeks to address longstanding challenges in financial inclusion for the island nation’s dispersed population, with potential implications for how sovereign states might leverage blockchain technology in social welfare distribution.

What happened

The government of the Marshall Islands has launched an experimental UBI scheme utilizing the Stellar blockchain platform. This pilot program aims to distribute cash transfers to citizens through blockchain-based digital wallets, circumventing the limited physical banking infrastructure and costly remittance systems that have historically constrained access to financial services in the country.

Stellar was selected for this project primarily due to its low transaction fees and fast settlement times, attributes critical to enabling frequent microtransactions such as UBI payments. The Stellar Development Foundation, a non-profit supporting the Stellar network, has publicly endorsed the initiative as a promising use case for enhancing financial inclusion.

This UBI pilot is distinct from the Marshall Islands’ previous blockchain-related effort, the Sovereign (SOV), which is a sovereign digital currency launched by the government but operates separately from the Stellar-based program. The pilot’s focus is on leveraging Stellar’s existing infrastructure and partnerships with banks and payment providers to bridge crypto and traditional finance.

According to analysis from Decrypt and commentary from the Stellar Foundation, this approach is seen as an innovative way to overcome the country’s banking access limitations, particularly given the Marshall Islands’ dispersed geography and the high costs associated with remittances. The IMF and World Bank have documented the structural challenges faced by the country, including limited physical banks and low financial inclusion rates, which underpin the rationale for exploring blockchain solutions.

Why this matters

The Marshall Islands’ experiment with Stellar for UBI highlights a broader policy shift toward leveraging blockchain technology to address financial inclusion in underserved populations. For small island economies with fragmented populations and limited banking infrastructure, traditional financial systems often fail to provide affordable and accessible services, impeding social welfare distribution.

By using a blockchain platform optimized for low-cost, rapid transactions, the pilot could demonstrate a viable alternative for governments seeking to implement direct cash transfers efficiently. This has potential implications beyond the Marshall Islands, suggesting a model for other sovereign states considering digital financial solutions for social programs.

Moreover, the project underscores the evolving relationship between crypto infrastructure and traditional financial systems. Stellar’s design, with its partnerships in the banking and payments sectors, positions it as a pragmatic choice for governments that require regulatory compatibility and operational reliability.

From a policy perspective, this initiative may inform ongoing discussions on how digital currencies and blockchain-based payments can be integrated into sovereign monetary frameworks and social welfare systems. It also reflects an emerging trend where blockchain is not only a speculative asset but a functional tool for public policy.

What remains unclear

Despite the confirmed facts about the pilot’s launch and technical underpinnings, significant questions remain unanswered. There is no publicly available data on the pilot’s operational metrics, such as the number of recipients enrolled, transaction volumes processed, or cost savings compared to conventional cash or bank transfers.

The effectiveness of the Stellar-based UBI in reaching the most marginalized populations—particularly those lacking smartphones or reliable internet access—is not detailed in available sources. This raises concerns about digital literacy and infrastructure barriers that may limit the program’s inclusivity.

Security and privacy mechanisms for protecting recipients within the blockchain system have not been disclosed, leaving open questions about data protection and fraud prevention in a public ledger environment.

Furthermore, how the pilot interacts with the Marshall Islands’ broader monetary policy and regulatory framework remains unclear. The relationship between the Stellar UBI project and the Sovereign digital currency (SOV) has not been explicitly explained, nor have any official government statements detailed adjustments to financial regulations to accommodate blockchain-enabled social welfare.

Finally, there is a lack of independent evaluations or third-party audits assessing the socio-economic impact, scalability, or sustainability of the blockchain-based UBI approach in this context.

What to watch next

Disclosure of operational data from the pilot, including adoption rates, transaction success, and cost-efficiency compared to traditional payment methods.
Government statements or policy documents clarifying regulatory frameworks and integration of blockchain UBI with existing financial systems and monetary policy.
Analysis on how the pilot addresses infrastructural challenges such as internet connectivity and digital literacy among the most vulnerable populations.
Independent assessments or audits evaluating the security, privacy, and fraud prevention measures within the blockchain UBI system.
Further developments clarifying the interaction or distinction between the Stellar-based UBI platform and the Sovereign (SOV) digital currency initiatives.

The Marshall Islands’ use of Stellar blockchain for a universal basic income pilot represents a noteworthy attempt to harness crypto technology to solve persistent financial inclusion challenges. However, with limited public data and unresolved questions about implementation and impact, the project remains an early-stage experiment. Its outcomes could provide valuable insights for other nations considering blockchain as a tool for social welfare, but much depends on forthcoming transparency and evaluation.

Source: https://decrypt.co/353079/marshall-islands-test-crypto-universal-basic-income-cash-banks-fall-short. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.