Republic of Palau audits the country’s Stablecoin Pilot project on the XRP Ledger

The Office of Public Auditor for the Republic of Palau has audited the country’s Stablecoin Pilot project on the XRP Ledger. A 12-page document from the office noted that the Ministry of Finance failed to comply with all legal checks before launching the Palau Stablecoin (PSC).

The audit comes more than two years after the Pacific island nation partnered with Ripple for the Stablecoin program to boost financial inclusion and reduce transaction costs. With Palau having the US Dollar as its national currency, the PSC was simply a Dollar-pegged stablecoin, with the pilot phase involving three local retailers and 154 government officials who volunteered to conduct the transactions.

According to the report, the Ministry of Finance failed to get all the necessary approvals to proceed with the partnership. It highlighted that neither the National Director of Program, Budget, and Management nor the Attorney General certified the agreements.

Under existing rules in the country, the Attorney General must certify all agreements, while the Director must provide a certification of funds before any government entity can spend state resources on public projects.

However, the Ministry did not observe these rules for the Stablecoin Pilot program. The Public Auditor considered them to be red flags but acknowledged that there was no evidence of misuse of resources.

Interestingly, the report also showed that Ripple funded the PSC pilot phase with $25,000, which the country’s treasury received. $14,035 was spent on the project, and most of the funds went to the three vendors to redeem the test stablecoins.

What is next for PSC?

Although the auditor did not identify any misappropriation in the pilot phase of the stablecoin and acknowledged that the Ministry of Finance acted within its mandate, it called for necessary certifications in future projects.

However, the Ministry defended its position, noting that it acted in line with legal advice from the Office of the President and did not get the Attorney General’s certification because the agreement with Ripple was a Memorandum of Understanding (MOU), which did not bind the country.

Nevertheless, whether the PSC will proceed beyond the pilot phase is unclear. This is because any subsequent step that would make the stablecoin become a widely accepted currency will require the legislature to pass a law on the issue.

The report said:

“Any further steps toward establishing a circulating currency would require legislative approval. Without the enactment of a law by the Olbiil Era Kelulau, such an expansion would be unlawful.”

Given that the last report on the Pilot for the Phase 2a was released almost a year ago, in July 2024, there is no clarity on what is next for the country.

Ripple celebrates landmark developments from Apex 2025

While the audit highlights how Ripple encouraged the development of stablecoins on the XRPL, the network appears to have seen sufficient development. XRPL has sizable stablecoin adoption with five stablecoins, including the Circle USDC, Ripple RLUSD, Braza Group USDB, Singapore Dollar-pegged XSGD, and Euro-pegged EURØP, all on the network.

A recent report from Ripple highlighted the network’s recent growth, culminating in major announcements at the Apex 2025 conference for the XRPL community. It noted that the event marked the turnaround for XRPL in its institutional adoption efforts, with stablecoins and real-world assets (RWA) tokenization growing on the network.

For instance, the Ondo tokenized US treasuries (OUSG) are now available for qualified investors on XRPL, while Guggenheim Treasury Services launched a digital commercial paper on XRPL in partnership with Zeconomy.

However, more enterprise-grade products for institutional investors might soon be coming to XRP with new features such as credentials, permitted domains, and multipurpose tokens, which are set to become available in the coming months.