Under the GENIUS Act Stablecoins Holders Have Only Fifth Priority in an Issuer Bankruptcy (Credit Slips)
According to Georgetown Law’s Professor Adam Levitin, argues that, despite its intentions, the GENIUS Act fails to adequately protect stablecoin holders in an issuer bankruptcy. While the Act claims to give stablecoin holders “first priority” over an issuer’s reserves, Levitin explains that they actually rank fifth in practice, behind: (1) repo and margin lenders, (2) debtor-in-possession (DIP) lenders, (3) bankruptcy professionals via carve-outs, and (4) setoff claims from depositaries and brokers. This is because the Bankruptcy Code’s priority provisions only apply to unsecured debt, while secured claims (which these other parties hold) are paid first under separate rules. Additionally, the Act’s promise of rapid payment within 14 days is unrealistic—distributions will likely take months or years due to procedural requirements and DIP lender restrictions. Levitin concludes that stablecoin holders will face significant losses and delays in bankruptcy, making stablecoins fundamentally unstable without government backing like deposit insurance. [Source: Credit Slips]
The Case for a New Floating Rate Treasury Note (Brookings)
Stanford University Graduate School of Business’s Darrell Duffie is proposing that the U.S. Treasury issue a new security called Perpetual Overnight Rate Treasury Securities (PORTS) to address liquidity demands arising from the digitization of financial markets and the growth of tokenized dollar instruments such as stablecoins. PORTS would be daily redeemable at par, pay interest at rates determined through daily uniform-price auctions, and yield below the Secured Overnight Financing Rate (SOFR) given anticipated demand for their use as collateral and settlement medium. The authors argue that PORTS would provide stablecoin issuers and other market participants with a risk-free, transparent instrument for same-day liquidity, potentially reducing systemic risks associated with runs on tokenized dollar proxies backed by longer-duration assets. Additionally, if demand for PORTS materializes as expected, the Treasury could reduce longer-dated issuance, resulting in taxpayer savings through lower borrowing costs. The proposal acknowledges operational challenges, particularly regarding the infrastructure needed for same-day settlement and selective redemption mechanisms, which would require substantial modifications to existing Treasury market procedures. [Source: Brookings]
Upcoming Speaking Engagements:
The Digital Euro Conference 2026 (Frankfurt, March 26) will explore the future of money with a focus on CBDCs, stablecoins, and commercial bank tokens. This hybrid event offers the perfect platform to understand the future of digital money! [Register here and get 20% off the regular ticket price by using the Kiffmeister20 code!]
I produce a monthly digest of digital fiat currency (DFC) developments exclusively for the official sector (e.g., central banks, ministries of finance and international financial institution (e.g., the BIS, IMF, OECD, World Bank)) plus academics and firms that are active in the DFC space (commercial banks, technology providers, consultants, etc.). (DFCs include central bank digital currency (CBDC), stablecoins and tokenized deposits.) It goes out via email on the first business day of every month, and if you’re interested in being on the mailing list, please email me at john@kiffmeister.com.
