I don’t know if it’s just because there were a ton of developments in areas like stablecoin regulation and prediction markets that I am especially focused on, but this was a crazy week in terms of crypto legal developments. We got long awaited GENIUS Act implementation regulations from the OCC and it’s a doozy and well-over 350 pages. At the same time, a new bipartisan bill was introduced aimed at protecting neutral software developers from going to jail for writing code, and a ton of developments around prediction markets including letters from Senators on the subject and a few enforcement actions by Kalshi against insider traders.
Here’s everything that happened last week in crypto law:
OCC Issues GENIUS Act Implementation Rulemaking
The Office of the Comptroller of the Currency (“OCC”) has released its long-awaited GENIUS Act implementation rulemaking, and unlike their sister agencies at the FDIC and NCUA, the OCC’s proposal is for comprehensive regulation over payment stablecoin issuers and not just the application submission and review process. The proposal addresses detailed definitions, permissible and prohibited activities, reserve standards, custody expectations, supervisory authority, enforcement integration, and adjudicatory procedures within the OCC’s existing regulatory structure
Tl;dr– One of the most significant sections seeks to implement the statutory prohibition on issuers paying interest or yield. The proposed rule would create a rebuttable presumption that certain affiliate or third-party arrangements with issuers constitute impermissible yield payments if they result in stablecoin holders receiving consideration solely in connection with holding of the stablecoin. I do think because of how “affiliate” and “related third parties” is defined in the rule, this is more narrow than many are reading this. But it also relies on anti-evasion language elsewhere in the bill for these rulemaking proposals which may not be applicable here. There are lots of other aspects of the proposed rules which I am sure companies will want to respond to, but the yield issue is something many are focused on while the state of the CLARITY Act’s yield issue is in flux.
Promoting Innovation in Blockchain Development Act
Shoutout to our friends at the DeFi Education Fund for really spearheading the effort to get the bipartisan Promoting Innovation in Blockchain Development Act of 2026 introduced in the House last week. The bill would protect software developers who write code, but do not control other people’s assets, from being classified as money transmission businesses who need to register as such or risk criminal prosecution. As explained by one of the bill’s sponsors: “It provides long-overdue legal clarity, protects innovation here at home, and allows law enforcement to focus on genuine criminal activity rather than chilling American technological leadership.”
Tl;dr– It would be great if market structure legislation with comprehensive developer protections could pass this year. That is the best-case scenario for the entire industry. But even without it, this type of bipartisan legislation would at least prevent developers from being forced offshore. America is the modern powerhouse it is today not because we are the agricultural and manufacturing giant that we were in the early 20th century, but because every major tech development since the telephone has been led by America. Great work by all involved in this effort and it’s something everybody who loves freedom and the American way should support.
OTHER STORIES
FED Reputational Risk Update: The Federal Reserve has submitted a proposed rule change for comment regarding removal of reputational risk from its supervisory review. After the entire industry saw the effects of Operation Chokepoint 2.0, I think this is a welcome relief.
SEC Enforcement Manual Update: The SEC has updated its Enforcement Manual for the first time in almost ten years. While ensuring the Wells notice process is applied uniformly and fairly is a subject near and dear to me personally (something the SEC failed to do in the DEBT Box case I helped litigate), the more significant update was probably the revised ability for settling parties to be able to include disqualification waivers at the same time instead of being forced to settle and then fingers crossed on this hugely important issue. That’s how it works in virtually any other civil matter settlement.
Banks Seek Crypto Custody Charters: Morgan Stanley is the latest of the large banks seeking a trust charter which would allow it to custody and stake customer digital assets. Fidelity previously sought and obtained such a charter along with various crypto-native firms like Ripple, so it was only a matter of time.
New SEC Crypto Taske Force Head: Taylor Lindman from Chainlink is taking the role vacated by Mike Selig as the chief counsel for the crypto task force. Great hire, and just like Mike before him, Taylor will bring a balanced understanding of both the law and tech which is crucial for the role. Also a huge sacrifice, as I imagine he had to divest of his crypto to take that role in the middle of a bear, so very much appreciate him taking that personal sacrifice to ensure the right person is in this role.
Wisdom Tree No Action: The SEC granted exemptive relief to allow WisdomTree’s Treasury Money Market Digital Fund to trade on an intraday basis which allows for faster settlement times due to the tokenized nature which makes this technically possible. For what it is worth, this is the type of thing that I believe will be made easier to obtain through the SEC’s expected innovation exemption plans.
Jane Street/Terra Lawsuit: The Terra bankruptcy administrator is blaming Jane Street for its collapse, claiming the firm used insider trading info which helps speed up the downfall of the Terra/Luna ecosystem. The lawsuit certainly contains some juicy accusations, but it’s comical that they claim the public blockchain data about a withdrawal from a liquidity pool couldn’t possibly be known absent insider info because it wasn’t publicly announced.
AI to Destroy Everything But Help Crypto?: Lots of talk this week of a Citrini research paper that they describe as “modeling a scenario that’s been relatively underexplored.” Bad news from the paper? AI is going to make everybody unemployable and global markets go to zero. Good news? AI will use stablecoins after price shopping other transaction fees. So at least our robot overlords appreciate good tech and cost savings.
Missouri Bitcoin Treasury: I don’t cover all the state crypto treasury proposals, but this one from Missouri got my attention as my home state is who is proposing it and it actually has a chance of advancing this time. Time for the Show-Me-State to buy the dip!
Senate Probe into Binance: Ranking Member Blumenthal of the Senate’s Permanent Subcommittee on Investigations sent a letter to Binance based on some prior reporting by the Wall Street Journal and others regarding sanctions issues. This seems like more smoke than fire which Binance has staunchly denied, but certainly worth noting as it appears this isn’t going away any time soon.
Crypto.com Bank Charter: Crypto.com is the latest crypto firm to obtain a banking charter. It is interesting that it is the first of the crypto companies to achieve that license that isn’t primarily focused on stablecoin issuance/infrastructure, but great to see more access for crypto into traditional financial rails.
ETH Foundation Funded Through Staking: The Ethereum Foundation is continuing to stake its ETH treasury to fund operations through staking rewards instead of sales of the native asset. I am on record as being an ETH maxi/bag holder (and while doing disclaimers, I also have large bags of BTC, SOL, HYPE, MORPHO, and AAVE, so take anything I say about any of those with a grain of salt as well), but I am a big fan of what they continue to build out despite already having achieved so much.
Transatlantic Taskforce: Fresh off the first meeting of the UK-U.S. Financial Regulatory Working Group, the UK Financial Conduct Authority has selected four companies to participate in its stablecoin sandbox. The UK is way behind on stablecoin regulations after the EU, U.S., Japan, and others have all enacted comprehensive stablecoin regulatory regimes, so not sure why they need a sandbox here, but some action is better than no action I guess.
Stripe/Kraken All-In on AI Payments: Both Stripe and the CEO of Kraken have made a ton of statements recently about agentic payments powered through crypto. For the record, I am siding with our AI overlords if it ever comes to humans vs. robots. While on the topic, it can’t be a coincidence that Stripe was one of the first payment giants to jump on supporting crypto payments and is also growing like crazy now.
Libra is Dead/Long Live Libra: Meta is back to making statements about a native payment token, after their prior plans for a token called Libra was killed by a death of 1,000 regulatory cuts. Tech giant facilitating digital asset payments? Good. Doing it while stablecoin yield issues are already holding up market structure and this adds potential logs to the fire? Not as good.
Vault Explainer: This primer on how Defi vaults work directed to asset managers is a great read. This focuses on Allocation Vaults, which is what Morpho provides (see above re: Morpho bag bias, which may be why I found this such a good read), but applies to other DeFi lending protocols as well.
Kalshi Insider Trader Crackdown: Kalshi used their self-regulatory powers to fine and ban multiple traders on their markets who were found to have traded on insider information in violation of the applicable markets’ terms. “The [CFTC] continues to coordinate with DCMs regarding their enforcement dockets and referral of appropriate potential violations to the [CFTC] for investigation.”
Senate Letter re: Polymarket: In less great news from a public perceptive standard on prediction markets, various members of the Senate Agriculture Committee sent a letter to Chair Selig regarding certain markets available on Polymarket. I don’t think people understand there is a difference between Polymarket’s DCM markets (fully KYC’ed and regulated) and markets on their DeFi platform (offshore, user created, and not available to U.S. users). This also would be the case re: alleged insider trading on insider trading investigation results.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.
Outro/Disclaimer: In late 2022, while I was at Polsinelli, I started preparing weekly updates for attorneys at the firm to stay abreast of the latest Web3 legal developments. I now post the weekly updates on my personal blog every Tuesday, where I also provide links to more obscure legal developments and otherwise discuss industry trends and stories. Please note, the views and opinions I express are solely my own. They do not reflect the official stance or endorsement of the Digital Chamber or any of its members.
The NFTtorney 