Paul confirmed that several Pacific Island nations (though he would not say which) had approached him to understand more about the scheme - and whether they could do it themselves. Photo: CFOTO / NurPhoto via AFP
The Marshall Islands is giving away free cash to its more than 33,000 citizens.
The government announced its universal basic income (UBI) system on Wednesday, with blockchain as its main mode of delivery.
It marks the first system of its kind in the world, where each citizen is periodically paid an equal sum regardless of how much they are making, it said.
Marshall Islands will give their citizens US$800 per year, per person, paid out quarterly. Citizens will have the option of receiving their payment via a stablecoin called USDM1, by cheque, or by bank deposit.
A stablecoin is a cryptocurrency pegged to a real-world asset or group of assets - in this case, US Treasury bonds, tethering it to the ever-changing value of the US Dollar.
Citizens can now access payments on a digital wallet called Lomalo, bypassing the need for bank account and thus, the RMI said, reaching the remotest parts of the nation where access to banking may not be a guarantee.
Alongside the lump-sum payment, the programme offers larger payments to those in extraordinary circumstances for issues such as food and housing.
The Marshall Islands government announced its universal basic income system on Wednesday, with blockchain as its main mode of delivery. Photo: RNZ Pacific
Spreading the wealth
The Marshall Islands is one of three Pacific Island countries (alongside the Federated States of Micronesia and Palau) in a Compact of Free Association with the US.
The nation receives around $67 million from the US each year in development assistance to run their government, an arrangement thus far untouched by the Trump administration.
Since 2004, the US has also paid into a trust fund for the nation, alongside Taiwan and the Marhsall Islands themselves. As of the 2024-25 fiscal year, that fund sits at a value of $1.042 billion with an weighted investment return of 20.66 percent.
An agreement signed in 2023 has committed the US to front-loading around $700 million into the fund over five years, ending in 2027 with no further commitments from there. The government has since been trying to figure out for a while now the best way to take the extra cash and do the most good with it.
Finance Minister David Paul told RNZ Pacific citizens have been asking for social investments out of the fund for some time.
"We didn't see the impact of it, as far as the majority of the Marshallese are concerned," Paul said.
"All this money goes into financiing the government, infrastructure development and ohter things, but people continue to see that their lives are not improving, their economic situations are not improving."
Paul described an "opportunity" to introduce a UBI without introducing any new taxes or transfers, thanks to their expectation that the trust fund would continue to grow.
The USDM1 stablecoin, essentially pegged to the wellbeing of the US government, reflected that confidence.
"What is the purpose of having a huge trust fund when you know we have all these ongoing issues, that we need assistance for?"
Trouble in paradise
A UBI has been on the Marshall Islands agenda for years now. When the government changed, the new President Hilda Heine promised to implement a UBI of at least $800 per year by October 2024.
Though they missed their cutoff date by more than a year, the proposal survived a change in US Administrations, and significant scrutiny from the International Monetary Fund.
The policy is designed to make consumer spending on basic necessities, such as food, education, transport and shelter, more predictable and secure at the household budget level. With a GDP per capita of approximately $5813.51 as of 2024, that payment would mean a bump in average annual incomes of around 13-14 percent.
At that point, Marshall Islands was growing by around 3 percent with inflation hovering at around 5.2 percent, according to the IMF. To them, it would boost consumer spending massively, driving up prices while potentially bringing workers out of the labour force, depending on the makeup of their household.
"Fiscal policy support in FY2025-FY2026 is appropriate, but its scale is excessive," the IMF reported in September.
"The authorities should replace the UBI at the first available and feasible opportunity with a more targeted scheme to ensure more effective uses of the CTF resources."
Paul stood by the commitment to make the payments universal.
"We're working with the likes of the IMF to also help track this in real time. And also we're working with also the likes of the ADB and the World Bank to track the social impact of this in real time," he said.
"So of course, there is going to be fresh data coming out for us soon to be able to understand fully the impact of a program like this."
Paul rejected the notion that the UBI would contribute to inflation.
Even if it would, it mattered far less to Paul than the unrelenting tidal force of global prices. The RMIs size and relative dependence on imports, like all Pacific Island states, made it more vulnerable to shocks, he said.
As such, the UBI would form the basis of a safety net for Marshallese citizens in tough times out of their own control. In other words, it would stop them from having to leave.
"In the years prior, (inflation) was in the double digits... Marshallese wouldn't be able to make a living and be able to stay in the Marshalls, and we would eventually be priced out of paradise."
But it isn't a foolproof strategy - a poor global economy would negatively impact the trust fund that the RMI relies on to pay out the UBI in the first place.
Paul said that the $800 per year was not a fixed figure - it would increase or decrease based on the performance of the fund, and for wider economic reasons.
"No one has a crystal ball, but we're confident that based on the way our portfolio has performed over the years, the money is going to grow."
So long as it only represented a fraction of the typical Marshallese income, Paul said the negative effects of a potential cut in UBI would not be too painful.
"You have to have a frame of reference.. if you look at last year there was zero, no assistance as such."
Will it work?
Paul confirmed that several Pacific Island nations (though he would not say which) had approached him to understand more about the scheme - and whether they could do it themselves.
"This is something that each government will have to navigate, I believe it's going to help sustain communities and societies going forward," Paul said.
The role of crypto as an "enabler" for Pacific Island countries, in terms of access to finance in the remotest parts of the region, has been top-of-mind for policymakers for some time. Countries are beginning to roll out regulatory frameworks, and explore it's usefulness for aid and trade.
Australian academic Monique Taylor has written extensively on the uptake of crypto in small island developing states. She told RNZ Pacific that banks are retreating from the region.
"Basic services like branches, ATMs and remittance channels are thin, expensive and unreliable," she said.
"As banking networks continue to recede, more Pacific governments are likely to look at digital wallets and stablecoin-like instruments as practical ways to move money to citizens who don't have bank accounts and who live in remote areas."
Taylor said the Marshall Islands is in a unique position with a vast pool of American cash to draw down on, an advtange that other Pacific island countries lack.
"Other Pacific countries with similar banking constraints but without a comparable trust fund might still adopt digital payment rails for more targeted welfare schemes or social transfers, but replicating a fully universal, permanently funded UBI of this kind would be harder."
However, in terms of how robust the system will prove, Taylor expressed doubts.
"The reliability question is less about "blockchain" as a technology and more about governance and supervision," Taylor said.
"Where reliability becomes an issue is in the surrounding system: the strength of supervision, the quality of anti-money-laundering and know-your-customer frameworks, operational risks in digital infrastructure, and the fiscal pressures that can arise if liabilities grow faster than the state can manage."
Paul said that when it comes to technical issues, they'll cross that bridge when they come to it.
"We're working with the likes of the IMF to also help track this in real time," he said.
"Universal basic income is really going to be a norm of the future."
