Japanese fintech company, Soramitsu, will develop Palau's bond market gateway after creating Cambodia's central bank digital currency (CBDC) Bakong. The system is set to go live on a trial basis in fiscal 2024, with full implementation expected in the following year. This platform will enable the Palau government to issue bonds to individual investors and handle payments efficiently. Notably, the system will leverage blockchain technology, the distributed ledger system underpinning cryptocurrencies like Bitcoin. Palau uses the US dollar as its official currency but does not have a platform for issuing bonds to investors. This limits domestic savings mobilisation for national projects as citizens rely on US banks like Bank of Hawaii and Bank of Guam. Given its status as one of the world's smallest nations, building a traditional financial system from scratch would be a significant challenge for Palau. Soramitsu's blockchain-based solution offers a cost-effective alternative. Sources familiar with the project revealed that the contract value is in the several hundred-million-yen range ($7.2 million to $14.4 million). This translates to less than half the cost of a non-blockchain system. Notably, Japan's Ministry of Economy, Trade and Industry (METI) has designated the Palau project as an aid recipient. The Japanese foreign and finance ministries will also offer strategic and project management guidance. Japan can assert its presence in the Pacific island nations by investing in infrastructure projects, amid competition from the US and China for influence in the region. China recently secured a security pact with the Solomon Islands and is reportedly in talks with Papua New Guinea and other countries regarding financial system development. Attribution: The Nikkei Asia
