By: Bernadette Carreon

KOROR, Palau — Palau’s flagship Digital Residency Program, once promoted as a pioneering step into the digital economy, is now facing one of its toughest tests as international legal challenges collide with growing questions at home about transparency and accountability.

The program’s director, Jay Anson, confirmed that the U.S. Attorney’s Office for the Southern District of New York issued him a subpoena demanding “100% of documents and records” tied to the Digital Residency Program. He said he believes he is being called as a material witness in a financial crimes investigation.

Anson said the subpoena has generated significant legal costs and that Palau’s Attorney General’s Office urged him to retain a lawyer “to protect the integrity of the program, Palau’s data, and Palau’s sovereignty.” President Surangel Whipps Jr. has acknowledged that funding may be needed for Anson’s legal representation, though he has not explained whether taxpayer money is involved or how much might be required.

That lack of transparency has triggered a response from lawmakers. The Senate Committee on Ways and Means and Financial Matters, chaired by Sen. Mark Rudimich, sent a formal request to the Ministry of Finance and Bureau of Budget and Planning seeking clarification on whether public funds are being used to pay Anson’s legal bills.

“We seek to determine whether any public funds have been used to cover attorney costs related to Mr. Anson’s activities, whether in his personal capacity or under the Digital Residency Program,” the committee wrote.

Launched in 2022 through the Digital Residency Act, Palau’s program is the world’s first government-backed blockchain-based digital identity platform. It allows foreign nationals to apply for digital residency in Palau, with advocates touting it as a bold innovation to diversify the economy beyond tourism. Supporters have also argued that it safeguards Palau’s sovereignty by giving the nation control over digital identities in an increasingly borderless online world.

But the subpoena and the lack of disclosure about how the government is handling the legal fallout are now testing those claims of resiliency. Lawmakers are questioning whether the program’s safeguards — for Palau’s sovereignty, its data, and its digital residents — can withstand external legal scrutiny without compromising national interests or drawing on taxpayer funds in unclear ways.