Published: December 24th, 2025
The Marshall Islands are an unlikely testing ground for financial innovation. With a population of roughly 40,000 scattered across the Pacific, the archipelago has more ocean than land and fewer banks than some mid-sized towns. Yet last month, the RMI government began trials of a novel method of paying its citizens: a universal basic income delivered partly through a blockchain-based digital asset.
The experiment is less utopian than it sounds. It reflects the practical difficulty of moving money in a place where cash is scarce, banking infrastructure is thin, and distance magnifies every institutional weakness.
The Islands' financial predicament is a hangover from the 2007 global financial crisis. After 2008, many international banks reassessed the economics of servicing small, remote jurisdictions. Compliance costs rose, returns shrank, and correspondent relationships quietly disappeared. The Marshall Islands were left with a single correspondent bank. It's the only option for core services such as wire transfers, supported by a handful of domestic branches spread across dozens of islands.
For citizens, cash remains the dominant form of payment because alternatives are unreliable. Cheques must often be cashed in person. ATMs are scarce and sometimes empty. Travelling to access funds can require long journeys by boat. Physical banknotes are shipped in, literally, by container.
A white paper accompanying the government's latest initiative is blunt: if the remaining correspondent bank were to withdraw, the country would be effectively severed from the global financial system. The digital experiment now underway is intended, at least in part, as insurance.
Under ENRA, the Marshall Islands' universal basic income programme, eligible citizens receive quarterly payments. Until recently, these arrived as paper cheques. Late last month, however, some recipients instead saw a balance credited to a smartphone wallet called Lomalo.
The funds appeared in the form of USDM1, a digital token issued on the Stellar blockchain. The wallet was developed by Crossmint, an enterprise blockchain firm, with funding support from the Stellar Development Fund (SDF). For now, the system runs alongside traditional payments rather than replacing them outright.
The design choices are revealing. Lomalo dispenses with many features familiar to cryptocurrency users. There are no seed phrases to record, no private keys to manage, no warnings about irreversible transactions. Crossmint generates and controls credentials on behalf of users. The objective is not self-sovereignty, but usability.
As one Crossmint analyst put it on X, most users care less about architecture than about whether “there's money in their account”.
USDM1 is described not as a stablecoin but as a fully collateralised sovereign bond, tokenised and distributed digitally. According to the Stellar Development Fund, the asset generates yield for its holder, akin to a money-market fund. Unlike most stablecoins, where interest accrues to the issuer, USDM1 is structured so that citizens receive the return.
The distinction may matter to regulators and lawyers, though probably less to recipients buying food or fuel. Still, it hints at the government's caution. Stablecoins, despite their growing popularity, have an uneven record. Some have broken their pegs spectacularly. A sovereign bond, even in digital form, carries different expectations of backing and responsibility.
The promise of USDM1 is that it allows the state to move value without depending on fragile banking relationships. In that sense, it is less a revolution than a workaround.
Supporters also point to social effects. Removing physical cash reduces exposure to theft or coercion as payments made to individual wallets, rather than shared household accounts, can alter who controls money within families.
The Marshalls UBI project draws on lessons from elsewhere. Over the past decade, international organisations have experimented with blockchain-based systems to distribute aid in difficult environments.
The UN World Food Programme's “Building Blocks” project, launched in 2017, uses a permissioned blockchain to deliver food vouchers to refugees, primarily in Jordan. More than 100,000 people use the system, authenticated by biometrics, reducing transaction fees and reliance on local banks.
In Ukraine, UN agencies have used blockchain networks, including Stellar, to distribute emergency cash since 2022, when conventional payment channels were disrupted. Oxfam's UnBlocked Cash pilot in Vanuatu, following cyclones in 2020, used Ethereum to deliver post-disaster transfers.
Governments have tended to tread lightly when engaging directly with crypto. El Salvador's 2021 embrace of Bitcoin included a one-off $30 payment to citizens who adopted a state-backed wallet. It was an inducement to use legal tender, not a standing welfare policy. Britain's GovCoin trials in 2017 looked at blockchain use for benefit payments, but faded away quickly.
More sustained official interest has gravitated toward central bank digital currencies. By late 2025, dozens of pilots were underway worldwide. CBDCs promise stability, regulatory control and the possibility of programmable payments. In theory, they could support targeted subsidies or even basic incomes.
In practice, only a few have been formally integrated into social programmes. Concerns about surveillance and privacy remain a major barrier to adoption, and central banks worry about being seen as overseers of individual household finances.
On that basis, the Marshall Islands experiment may not usher in a new era of crypto-run welfare programs. The sums involved are modest, the customer base is small, and the arrangement is tailored to a specific jurisdiction with specialized needs.
In places where banking systems function reasonably well, crypto remains a solution in search of a problem. In places where those systems have withered, the hierarchy reverses.
Whether USDM1 proves durable will depend less on blockchain throughput than on governance: how reserves are managed, how disputes are resolved, and how trust is maintained if something goes wrong. Those are old questions, wearing new technical clothes.
For now, the Marshall Islands are not betting on crypto so much as hedging against institutional fragility. That alone explains why this experiment is happening not in a financial hub, but at the edge of the map.
