Digital residency ID bill dies in Palau Senate


A plan to pass a Digital Residency Identification law this weekend did not succeed when the bill failed to get majority votes in the Palau Senate.

The votes were split even with 6 No and 6 Yes.

The bill was rushed through both House and Senate, with an expressed goal of having it take effect by 14 December. The rush to have it enacted to meet this timetable was cited as one of the reasons some of the Senators voted against the bill.

The bill was submitted by President Whipps to both House and Senate on 02 November, saying that it will help diversify Palau’s economy, urging quick action “as other nations are also jockeying to make a name in this market.”

“Our action to oppose this bill wasn’t about we agree or disagree with President. It was about deciding whether it was the right thing to do or not. And from what we see in our review and analysis of this bill as it is structured, make some of us feel that having to rush the passage of this bill without sufficient due diligence may not be the right thing to do. The expressed deadline of 14 December for the programme by which this bill proposes to take effect was clearly premature and unrealistic to some of us. That is why we didn’t have a choice but to vote against it.” stated Senator Secilil Eldebechel, Chairman of Senate Committee on Banking, Insurance and Other Financial Matters.

Other senators that voted against the bill were Senators Sengebau, Remengesau, Rudimch, Sungino and Tabelual. The six Yes votes were Senators Inabo, Isechal, Baules, Whipps, Akitaya, and Kuartei (voted abstain).

The bill sought to have Palau issue “digital residency identification” or an electronic Palauan ID to non-Palauans overseas, similar to the idea of the “elite visa” programme without requiring that the person come to Palau. It gives the bearer of an ID, a legal identity as a resident of Palau without actually being a physical resident. The person with ID will be able to use it as an identification to open accounts, trade online, or do activities online that require identification.

The second major component of the bill was the establishment of “Cryptocurrency Exchange Licensing”. This would allow Palau to license companies that conduct trading of cryptocurrencies, where people would exchange dollars for cryptocurrencies.

The bill calls for a “service provider”, a contracted company to work with the Ministry of Finance to administer the Digital Residency programme. The now-dead proposal exempted the contracting of the “service provider” from the procurement requirements.

Senator Kuartei who voted abstain said that he did his homework and he believed that “digital residency identification” is harmless and can be of benefit. “Having a digital residency ID does not exempt them from any immigration or labor laws in Palau. If they come here, they will have to go through the process like everyone else.” He felt that Palau is in a “unique time” and that this can help Palau’s economy. Abstain vote is counted as yes vote.

Senator Elbechel in response to an inquiry from Island Times said that he was not against the digital residency programme.

“I want it to be clear that I was not against the concept of a digital residency programme. I think that was a good idea to explore as a potential source of revenue for the government. However, the process in which the bill was proposed made it difficult for me to determine whether it will serve the best interest of the ROP.”

There have been two separate bills that touch on the use of cryptocurrency and digital services, the Digital Residency Identification and the Exempt Corporation. In addition, an MOU has been signed between the Palau government and RIPPLE, a blockchain company based in San Francisco to explore the creation of Palau’s national digital currency.

“Some of us are confusing this Digital Residency with Ripple and the national digital currency issue. This is not related to Ripple, but a different company, Cryptic Labs. It just so happens they were here at the same time,” stated Senator Kuartei.

“The fact that Cryptic Labs was a chosen partner to work within the operation of the digital residency program even before the bill passed, made me feel uneasy with a degree of transparency in this whole process,” said Eldebechel.