The first envelope looked innocuous enough. A sticker on the white cardboard sleeve said it came from Hangzhou City in the east of China. Opening it up revealed something more ostentatious: a second blue envelope with a regal gold stamp.
“Welcome to the Metaverse on Earth!” the letter inside read. Attached was my new identity card for the Republic of Palau, a tropical island nation in Micronesia near Indonesia and the Philippines. I was now officially a “digital resident” of Palau, despite never stepping foot in the country. According to the website I bought the ID from, run by a company called RNS.ID, I could use it to check-in to rental accommodation and could extend a tourist visa for Palau by 180 days if I wished. Most importantly, I could use it as my identity document on cryptocurrency exchanges.
That is exactly what traders in the U.S. are doing in order to bypass restrictions on the amount of cryptocurrency they can withdraw and the exchanges they can use, according to interviews with users, a review of Discord messages and YouTube tutorials, and my own successful tests. Many exchanges don’t allow signups from the U.S. because of the country’s still strict regulations around cryptocurrency. But with a Palau ID, U.S. traders can skirt that issue, and claim they come from Palau. The ID is so ripe for abuse that major cryptocurrency exchanges such as Binance and Kraken have already banned use of the ID from their platforms.