The finance train in the Marshall Islands

Oh people, things are changing there in the Republic of the Marshall Islands. The people there are starting to get involved with cryptocurrency to give a boost to the citizens.

At the end of last month, there were people who received paper checks for the so-called ENRA, which is their universal basic income program. Others saw a token called USDM1 appear in the Lomalo, which is like a digital wallet for citizens, built on the Stellar network and created by the folks at Crossmint.

This USDM1 is not just currency: it is a sovereign bond, fully guaranteed, that earns interest and serves as a medium of exchange for the more than 40,000 residents of the islands. Paul Wong from the Stellar Development Fund explained that, unlike stablecoins, where the issuer benefits, in this case, it is the owner of the asset who receives the yield. It's almost like a money market fund.

For those who use Lomalo, the difference between stablecoin and sovereign bond doesn't matter much. What they really want to know is if there's money in the account. Crossmint co-founder Rodri Fernandez Touza said they made the system very simple, without those complicated crypto things, like seed phrases or weird pop-ups. Crossmint itself takes care of user credentials.

Payments from USDM1 are made every three months to citizens who are entitled. This opens a good opportunity to digitize the economy in a country that already uses the dollar and still depends on the United States postal service.

The struggles of the Marshall Islands

Over there, cash still rules, but not by choice. After the 2008 crisis, many banks abandoned the Marshall Islands, and people became increasingly dependent on cash. Today there is only one correspondent bank operating, with a few branches scattered around. Some people travel miles just to cash a check.

If this bank decides to leave, the country will be cut off from the global financial system. Then USDM1 appears as an alternative.

Despite the territory being large, almost the size of Mexico, internet access improved with Starlink. But physical money still arrives in containers, and sometimes people travel by boat to find an empty ATM.

The role of the SDF

The Stellar Development Fund is behind this initiative, funding the development of USDM1 with millions of dollars. They already have experience in similar projects: they helped Germany with payroll for health professionals in the Middle East, worked with the UN on resource distribution, and even set up a support system in Ukraine using stablecoin USDC.

According to Wong, the idea is to treat each person as the unique owner of their digital funds. This can change even old social relationships, especially for women, who now receive directly and do not need to share with a joint account controlled by men.

👉 In summary: USDM1 is a new way for the Marshall Islands to deal with money, mixing tradition and technology, and trying to solve the struggles of living in such a dispersed place and dependent on paper money.