The Marshall Islands has taken a bold step towards financial innovation and social welfare by launching a groundbreaking universal basic income (UBI) initiative, offering payments in cryptocurrency alongside traditional methods. This move has sparked curiosity and debate, as it marks a world-first in the realm of UBI programs.
In a bid to alleviate the rising cost of living, the Marshall Islands government has committed to providing every resident citizen with quarterly payments of approximately $200. The first disbursements were made in late November, and recipients have the flexibility to choose between receiving the funds in a bank account, by cheque, or as cryptocurrency on the blockchain through a government-backed digital wallet.
Marshall Islands' Minister for Finance, David Paul, emphasized the government's commitment to ensuring no one is left behind. He highlighted that the UBI payments are designed to boost morale rather than encourage job quitting, with an annual sum of around $800 per person.
The Marshall Islands, an archipelago situated between Hawaii and Australia, has a population of approximately 42,000. Paul explained that the payments are intended as a social safety net amidst rising costs and the departure of citizens.
The UBI scheme is funded by a trust established through an agreement with the United States, which aims to compensate the Marshall Islands for decades of American nuclear testing. The trust fund holds over $1.3 billion in assets, with the US committing an additional $500 million until 2027.
Dr. Huy Pham, an associate professor and crypto-fintech expert at RMIT University, emphasized the uniqueness of the Marshall Islands' initiative, stating, "This is the world's first national rollout of a UBI program." He further highlighted the innovative use of blockchain technology as a nation-wide implementation.
The cryptocurrency delivery option, involving the transfer of a stablecoin pegged to the US dollar, was designed to overcome the practical challenges of reaching residents across hundreds of remote islands.
"We recognized the potential of blockchain technology," Paul said.
While blockchain is commonly associated with cryptocurrencies like Bitcoin, it can also be utilized to store and transfer more conventional assets, such as government bonds. The Marshall Islands is leveraging this technology to underpin its digital payment scheme.
However, according to Pham, digital payments alone may not guarantee financial inclusion, especially in a country like the Marshall Islands where internet connectivity is inconsistent.
"Enhancing internet coverage and smartphone penetration is crucial for a blockchain-based economy," he emphasized.
Most recipients have opted for conventional payment methods, with approximately 60% of the first round of payments deposited directly into bank accounts, and the remainder issued as paper checks. Only a small number of individuals, around 12 so far, have chosen to receive payments through their digital wallets.
Anelie Sarana, the finance manager overseeing the rollout, shared that her team has been traveling to the outermost islands to register people for the scheme over the past year.
Sarana noted that many recipients are using the funds immediately to meet basic needs such as food and essentials, while others have utilized the $200 for celebrations marking the annual Gospel Day holiday, which coincided with the first distribution.
"I can see the happiness in the streets; there's a buzz of activity, almost like a festival," she said.
This isn't the Marshall Islands' first foray into cryptocurrency. In 2018, the government attempted to create a national cryptocurrency called the Sovereign or SOV, but the plan was halted after warnings from the International Monetary Fund (IMF).
The IMF has cautioned that while the technology underpinning the current scheme is innovative, the blockchain-based delivery of UBI carries financial, fiscal, legal, reputational, and financial integrity risks, especially if governance and oversight are not robust.
Dr. Monique Taylor, a lecturer in world politics at the University of Helsinki, expressed uncertainty about the success of the Marshall Islands' experiment with UBI and a cryptocurrency delivery system.
"Universal income schemes are uncommon, especially at a national scale, and there are no direct precedents combining this fiscal architecture with a digital delivery component in a small island state," she said.
However, Taylor acknowledged potential benefits for small island nations.
"In a geographically dispersed island state with limited conventional banking infrastructure, a digital wallet could reduce frictions and make transfers more accessible, particularly in remote atolls," she added.
The Marshall Islands' bold initiative has undoubtedly sparked curiosity and debate, leaving many wondering about the potential impact and long-term success of this innovative approach to social welfare and financial inclusion.
