Palau has suspended all crypto activities in the island nation. A local report has revealed the country, located in the Western Pacific Ocean, initiated the moratorium after authorities became concerned with a local crypto startup that falsely claimed to have the government’s backing.
The Palau Financial Institution Commission (FIC) initiated the moratorium in late March. The FIC is the financial services industry regulator in Palau, a country that is made up of over 340 islands. While it has previously been hands off with crypto startups, recent developments have forced the commission into action.
According to sources in the FIC, the moratorium was triggered by crypto startup Palau Coin, which claimed to be a government-backed venture. On its website, it described itself as “blockchain technology-based decentralized digital currency of the Palau Tourism Environmental Protection Fund led by the government of the Republic of Palau.” Further, it claimed association with Beijing, China’s capital. This would have strained the budding relationship between Palau and Taiwan.
Government officials discovered the Palau Coin website just days before a visit by the Taiwanese president. Palau’s president, Tommy Remengesau, quickly distanced his government from the startup. Speaking to reporters, he warned other cryptos against associating themselves falsely with his government.
In response to the Palau Coin incident, the FIC has now halted all crypto activities in the country. The temporary ban will remain in place until the government formulates and implements a legal framework that will govern the budding industry.
The ban will affect any new startup that wishes to engage in business activities involving “virtual assets, virtual currency service provision, crypto-assets and cryptocurrencies,” the report stated.
The ban comes after the Palau government expressed support for blockchain and crypto startups in the country. With a population of 22,000 citizens, the country relies on tourism as the backbone of its economy. It’s thus greatly exposed to the ever-changing global economic swings. Cryptos would give them a bit more stability, the country’s Minister of Finance has previously stated. He also recognized blockchain technology as the future, saying his country doesn’t want to lag behind as others progress.
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