Digital Markets Clarity Act – Insolvency Safe Harbor (Credit Slips)
In a letter to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, fourteen legal academics argued that section 702 of the proposed Digital Asset Market Clarity Act threatens financial stability by extending bankruptcy safe harbors to digital assets. The text posits a causal link between existing safe harbors and the 2008 financial crisis and claims the absence of such exemptions contained the 2023 failures of crypto-asset firms like FTX. However, the document acknowledges a confounding variable: digital assets in 2023 were not fully integrated into the broader financial system, which inherently limited systemic effects regardless of safe harbor applicability. Ultimately, the proposed provisions would inequitably place digital asset holders in a “preferred position” over standard commercial creditors like employees, suppliers, and tort claimants. [Credit Slips]
And some more backfilling of news that I missed…
Modernizing Palau’s Financial System: Opportunities and Risks (IMF)
[February 16, 2026] The IMF published a selected issues paper on the opportunities and risks of modernizing Palau’s financial system that included an analysis of the government’s planned “tokenized dollar” (TD) that follows up on the Palau Stablecoin proof-of-concept that concluded in June 2024. While intended as a 1:1 USD-backed stablecoin to improve payment efficiency, the analysis questions its use-case justification and operational viability. Adoption faces substantial barriers, including entrenched cash preferences, inadequate IT infrastructure, and a lack of commercial bank buy-in. Furthermore, the TD introduces severe systemic vulnerabilities, notably acute financial integrity risks, cybersecurity gaps, and privacy compromises on public ledgers. Crucially, managing the reserves creates considerable fiscal exposure, risking speculative attacks. Mitigating these threats requires rigorous regulatory frameworks and profound institutional capacity building. [IMF]
Palau President Whipps Proposes Tokenized Dollar Payment System (Island Times)
[July 14, 2025] Palau President Surangel S. Whipps Jr. submitted to Congress a Draft Digital Payment System Bill outlining a modernized national payment system involving a “tokenized dollar (TD)”. The proposal would place the Ministry of Finance in charge of issuance and administration, with each TD fully backed by U.S. dollars held in a government-controlled account and redeemable for cash. TD would circulate through digital wallets for payments to participating merchants and government agencies, with private providers permitted to support operations under ministry supervision. The bill provides for monthly reporting, regular audits, and data-protection commitments, while allowing adoption incentives for two years. This follows a Palau Stablecoin proof-of-concept that concluded in June 2024. [Island Times]
BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.
FYI 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.
