An Australian finance director has flown to Nauru with ambitions to turn it into the crypto powerhouse of the Pacific.
Nauru’s newly minted Command Ridge Virtual Asset Authority creates a licensing and regulatory scheme for digital asset transfers, including cryptocurrency lending and exchange.
It makes Nauru the first nation in Oceania to regulate digital finance.
Brian Phelps, the new chief executive of the CRVAA, told RNZ Pacific that it could transform the Nauru economy, and potentially that of the whole region.
“Nauru is a vulnerable country in terms of its economy, and the whole idea of setting this up is to think innovatively about how to resolve some of [those] concerns and build a better economic future.”
If a trusted, stable regulator existed, Phelps said, it could lay the foundation for money flows in the Pacific to go fully digital, as they set the example for other nations developing their own regimes.
Thus, it could be transformational for key revenue streams, such as remittances, Phelps added.
“You’ve probably heard of Western Union and businesses. I have a view that Nauru could become a remittance payment provider for itinerant workers throughout the Pacific who would like to send money home.
“A safe, secure means of doing that now is through things like a stablecoin.”
This comes as traditional remittance payment systems become more risky.
On 3 July, Australia’s financial crime enforcer AUSTRAC announced an audit of Western Union, the Pacific’s largest remittance provider, for gaps in its anti-money laundering systems, including poor customer due diligence, and non-reporting of suspisious transactions.
Phelps has pondered whether Nauru could compete with Western Union in the remittance game.
“These are just ideas for Nauru to look to develop its capability.”
In most countries, cryptocurrencies have operated within a legal grey area, as more and more businesses begin to accept them as a medium of exchange, without state laws recognising them as legal tender.
Over the last few years, nations have begun to bring them within a special legislative framework, with the aim of making them more stable and thus reliable.
In the United States, the chief outcome of a week dubbed “Crypto week” by House Republicans was the GENUIS Act, which ruled that cryptocurrencies called “stablecoins” had to be pegged 1 to 1 to the US Dollar, providing them greater stability as an investment.
Meanwhile, in countries like China, the use of cryptocurrencies by individuals remains heavily restricted.
Pacific Islands have met the rise of crypto with enthusiasm, Phelps said.
“In Palau, for instance, they are developing a digital residency program and a stablecoin program in that country (for) cross border transactions. And Fiji and Vanuatu have been investing in opportunities around a central bank digital currency,”
Around that time, the ABC reported that the Pacific was becoming a “testing ground” for the crypto world.
For example, an Oxfam project using blockchain technology for humanitarian aid, which has been supported by MFAT and Australian Aid, used Vanuatu as a testing ground after Tropical Cyclone Harold in 2019.
The program, called “UnBlocked”, uses a digital payment system with special vendors at aid supply sites, operational across Vanuatu and Papua New Guinea.
According to Oxfam, more than 35,000 people in the Pacific have benefited from it.
In terms of becoming legal tender, though politicians like Fijian Prime Minister Sitiveni Rabuka have championed crypto, central banks have often cautioned against it.
In Tonga, the ambitions of the late Lord Fusitu’a – who passed away in February 2024 – to make Bitcoin a legal tender never panned out.
For Tuvalu, the problem is more existential, as climate change threatens the country’s infrastructure; indeed the very land it sits on.
In 2021, Tuvalu was establishing a “national digital ledger” using a digital currency linked to a blockchain, something that is still in the works.
