Blockchain and Digital Assets News and Trends – February 2025
This periodic bulletin is designed to help companies identify important legal developments governing the use and acceptance of blockchain technology, smart contracts, and digital assets.
While the use cases for blockchain technology are vast, this bulletin focuses on uses of blockchain and smart contracts in the financial services sector. With respect to digital assets, we have organized our approach to this topic by discussing them in terms of traditional asset type or function (although the types and functions may overlap) – that is, digital assets as:
- Securities
- Virtual currencies
- Commodities
- Deposits, accounts, intangibles
- Negotiable instruments
- Electronic chattel paper
- Digitized assets
In addition to reporting on the law and regulation governing blockchain, smart contracts, and digital assets, this bulletin will discuss the legal developments supporting the infrastructure and ecosystems that enable the use and acceptance of these new technologies.
INSIGHTS
Meme coins alleged to be securities in two new class actions
By Michael Fluhr and Liz Caires
On January 16 and January 30, two related class actions were filed in the US District Court for the Southern District of New York against Baton Corporation LTD (Pump.Fun) and its founders. The complaints allege that Pump.Fun promoted and sold unregistered securities in the form of meme coins created and sold on its platform. Read more.
STATUTORY AND AGENCY DEVELOPMENTS
FEDERAL DEVELOPMENTS
White House
President Trump issues Executive Order on digital fintech. On January 23, the White House announced that President Donald Trump signed an Executive Order (EO) titled, “Strengthening American Leadership in Digital Financial Technology.” The EO directed digital asset regulators to provide “regulatory clarity” and “well-defined jurisdictional regulatory boundaries” in accordance with President Trump’s policies to support the growth and use of digital assets, blockchain technology, and related innovations while protecting economic liberty. The EO discussed the risk of Central Bank Digital Currencies (CBDCs) and prohibited the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the US. The EO also directed the revocation of the Biden Administration’s EOs and the US Department of the Treasury’s Framework for International Engagement on Digital Assets. Finally, the EO established President Trump’s Working Group on Digital Asset Markets. The Working Group is comprised of various governmental agencies, including the Commodity Futures Trading Commission (CFTC), the US Securities and Exchange Commission (SEC), and the Federal Reserve, as well as the heads of agencies in the Executive Branch. The EO charges the Working Group to identify all regulations, guidance documents, orders, or other items that affect the digital asset sector. The Working Group is also required to submit to its Chair, David Sacks, recommendations on whether each identified regulation, guidance document, order, or other item should be rescinded or modified; or, for items other than regulations, adopted in a regulation. Within 180 days of the date of the EO, the Working Group must submit its report to President Trump. The report should:
- Propose a federal regulatory framework governing the issuance and operation of digital assets, including stablecoins, in the US, considering provisions for market structure, oversight, consumer protection, and risk management; and
- Evaluate the potential creation and maintenance of a national digital asset stockpile and propose criteria for establishing such a stockpile.
Crypto czar and Congress members outline cryptocurrency regulatory strategy. On February 4, White House Special Advisor for AI and Crypto David Sacks held a press conference joined by Senate Banking Committee Chairman Tim Scott (R-SC), Senate Agriculture Committee Chairman John Boozman (R-AR), House Agriculture Committee Chairman Glenn Thompson (R-PA), and House Financial Services Committee Chairman French Hill (R-AR). They outlined the White House’s short-term approach to cryptocurrency regulation supporting the objectives of President Trump’s “Strengthening American Leadership in Digital Financial Technology” EO. Sacks emphasized the need for regulatory clarity instead of regulation through “arbitrary prosecution and persecution,” and President Trump’s directive to examine a bitcoin reserve. Congress members introduced efforts to better educate other members of Congress on crypto assets and networks, as well as Senator Bill Hagerty’s new stablecoin bill, and their aims to create a comprehensive federal regulatory framework for digital assets to foster innovation and protect consumers.
President Trump signs EO on deregulation. On January 31, the White House announced that President Trump signed an EO titled, “Unleashing Prosperity Through Deregulation.” The EO requires all governmental agencies – when promulgating a new rule, regulation or guidance – to “identify at least 10 existing rules, regulations, or guidance documents to be repealed.” The Director of the Office of Management and Budget is charged to ensure standardized measurement and estimation of regulatory costs to meet the EO’s requirement that, for fiscal year 2025, the total incremental cost of all new regulations – including repealed regulations – be significantly less than zero. The stated goal of the EO is to halt the regulatory “blitz” of the Biden Administration, which “imposed a historic $1.7 trillion in costs,” and to reinvigorate small business development, consumer choice, and innovation.
FDIC
FDIC releases documents related to supervision of crypto-related activities. On February 5, the Federal Deposit Insurance Corporation (FDIC) announced the release of 175 documents related to its supervision of banks that engaged in, or sought to engage in, crypto-related activities. FDIC Acting Chairman Travis Hill noted that the decision “reflects a commitment to enhance transparency,” unlike the prior FDIC approach which “has contributed to a general perception that the agency was closed if institutions are interested in anything related to blockchain or distributed ledger technology.” Chairman Hill asserted, “[W]e are actively reevaluating our supervisory approach to crypto-related activities. This includes replacing Financial Institution Letter (FIL) 16-2022 and providing a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles.”
This release of documents follows Coinbase’s February 4 announcement that it sent a letter to the Office of the Comptroller of the Currency (OCC), Federal Reserve, and FDIC calling for updated guidance on crypto custody and execution services (C&E), as well as action to eliminate rules that wrongfully restrict access to banking services for C&E providers.
SEC
Chairman Uyeda announces Crypto Task Force. On January 21, Acting SEC Chairman Mark Uyeda announced that fellow Commissioner Hester Peirce would lead a new crypto task force “dedicated to developing a comprehensive and clear regulatory framework for crypto assets.” According to Chairman Uyeda, the task force will work on developing regulations within the SEC’s existing statutory framework and also advise Congress on legislative changes. Commissioner Peirce offered additional context in a published statement on February 4. She emphasized the need for a more structured and “legally defensible” approach to crypto regulation and promised to work across the entire SEC and collaborate with other regulators to disentangle ongoing litigation and regulatory ambiguities. Initiatives would include reexamining the security status of various crypto assets, providing temporary relief for coin and token offerings, and modifying existing paths to registration, such as Regulation A and crowdfunding. Additionally, the task force will address the regulatory status of crypto-lending and staking programs and consider new types of crypto exchange-traded products. Finally, Commissioner Peirce invited public engagement through written email submissions and in-person or virtual meetings.
SEC repeals controversial accounting guidance. On January 24, the SEC rescinded Staff Accounting Bulletin 121 (SAB 121), an agency guidance document that many in the banking industry viewed as an obstacle to providing custodial services for cryptocurrency. SAB 121 effectively required banks to treat any cryptocurrency held on behalf of customers as a liability on their balance sheets. As we covered in a previous alert, Congress passed a congressional resolution to repeal SAB 121 in May 2024, but was unable to overcome a presidential veto. In published statement, Commissioner Hester Peirce called the repeal of SAB 121 the first “milestone” for the Trump Administration’s Crypto Task Force.
SEC and CFTC Commissioners give insight into the Trump Administration. SEC Commissioner Hester Peirce and CFTC Commissioner Summer Mersinger spoke on February 11 at the webinar “Cryptocurrency After the Election” for the Federalist Society. Other panelists included House Representative Dusty Johnson (R-SD) and Senator Cynthia Lummis (R-WY). The panel discussed their expectations of how US financial regulators and Congress will approach cryptocurrency and other digital assets under the new administration.
SEC’s Crypto Task Force publishes discussion topics with crypto investment firm A16z. On February 5, the SEC’s newly formed Crypto Task Force met with representatives from crypto investment firm AH Capital Management, LLC (A16z) to discuss issues related to regulation of crypto assets. The SEC later published materials provided during the meeting. The meeting is particularly notable because, according to public reporting, President Trump has chosen A16z’s Head of Policy Brian Quintenz to lead the CFTC. The published materials suggest the meeting covered several key areas, including the need for a clear token taxonomy and guidance on decentralization, which is crucial for the functioning of blockchain systems without unilateral control. A16z emphasized the importance of providing interpretive guidance on “airdrops” and incentive-based rewards to prevent these distributions from being classified as securities offerings. The firm also advocated for modifying crowdfunding rules to better suit crypto startups, suggesting an increase in the maximum amount that can be raised and allowing broader investor participation. Additionally, A16z proposed enabling broker-dealers to operate in both crypto assets and securities, which A16z argued would enhance market functionality and investor protection.
CFTC
CFTC enforcement to refocus on fraud and stop regulation by enforcement. On February 4, CFTC Acting Chair Caroline D. Pham announced a reorganization of the Division of Enforcement’s task forces to combat fraud and help victims while ending the practice of regulation by enforcement. Previous task forces will be simplified into two new task forces: the Complex Fraud Task Force, led by Deputy Director Paul Hayeck, and the Retail Fraud and General Enforcement Task Force, led by Deputy Director Charles Marvine. According to the announcement, the new structure will better leverage staff expertise and more efficiently utilize CFTC resources, while providing enhanced governance and oversight.
CFTC to conduct crypto CEO forum to launch digital asset markets pilot. The CFTC on February 7 announced that it will hold a CEO forum of industry-leading firms to discuss the launch of the CFTC’s digital asset markets pilot program for tokenized noncash collateral, such as stablecoins. Participants will include Circle, Coinbase, Crypto.com, MoonPay, and Ripple. Further information on the CEO forum will be released once details are finalized.
CFTC launches initiative to combat romance scams. On February 10, the CFTC announced a renewed cross-agency initiative called Dating or Defrauding? to combat “relationship investment scams” – commonly known as romance scams or pig butchering – which involve gaining a victim’s trust through dating apps, social media, and text messaging before soliciting their investment in a fraudulent scheme, often involving cryptocurrency.
CFPB
CFPB closed for work. On February 10, the new Consumer Finance Protection Bureau (CFPB) Acting Director, Russel Vought, reportedly notified CFPB staff they cannot “perform any work tasks” and “should not come into the office.” This notice came after Director Vought directed staff to cease any pending investigations and announced on X (formerly Twitter) that he had notified the Federal Reserve that the CFPB "will not be taking its next draw of unappropriated funding because it is not 'reasonably necessary' to carry out its duties." The CFPB is permitted to use its “current balance of $711.6 million” to continue to pay salaries and operating expenses.
STATE DEVELOPMENTS
Digital assets
Telcoin approved as Nebraska’s first digital asset bank. On February 4, Telcoin Bank announced that it had been granted conditional approval by the Nebraska Department of Banking and Finance to open the state’s first Digital Asset Depository Institution under the Nebraska Financial Innovation Act. Telcoin Founder and CEO Paul Neuner asserted that while Wyoming and the OCC did issue three charters previously, none of them have been able to gain access to the Fed payment system. “The Nebraska charter creates an actual bank charter, and the first that is explicitly authorized to connect consumers to DeFi,” he said.
ENFORCEMENT ACTIONS AND LITIGATION
FEDERAL
SEC
SEC charges blockchain engineer with “rug pull” fraud. On January 16, the SEC announced it filed and settled charges against Eric Zhu, a New York blockchain engineer, for allegedly perpetrating a fraudulent scheme to defraud investors in the “Game Coin” token (GME). The SEC alleged that GME was offered and sold to the public by Game Coin, LLC and its founders through a crypto asset trading platform that facilitates the creation and operation of liquidity pools for trading crypto assets. According to the SEC’s complaint, a person who deposits a crypto asset token pair (ie, liquidity) into a liquidity pool receives liquidity provider tokens (LP tokens). The SEC alleged that, absent safeguards, the holders of LP tokens can, without warning, withdraw liquidity from the pool, sell significant amounts of crypto assets into the pool, and cause losses to investors (ie, a rug pull). The SEC alleges that Game Coin and its founders represented to investors in publicly available social media posts that “liquidity” was “locked,” conveying that LP tokens could not be used by the issuers or other insiders to engage in a rug pull. Yet, according to the SEC’s complaint, Zhu kept certain LP tokens unlocked and used them in a rug pull. In so doing, Zhu misappropriated crypto assets worth approximately $553,000 and caused a decline in the price of GME of approximately 12 percent.
The complaint charges Zhu with violating the anti-fraud provisions of Sections 17(a)(1) and (a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. Without admitting or denying the allegations in the SEC's complaint, Zhu agreed to pay disgorgement and prejudgment interest of $672,992, and a civil penalty of $150,000. The settlement is subject to court approval.
Commodities
CFTC secures more than $9 million in judgments against alleged crypto fraudsters. On February 10, the CFTC announced that New York resident Rashawn Russell had been ordered to pay more than $1.5 million in restitution to victims of an alleged fraud scheme. According to the consent order, Russell solicited bitcoin, ether, and fiat currency investments from more than 24 victims for a purported digital assets trading fund. The CFTC alleged that Russell misrepresented material facts about the fund and failed to trade the assets he received, instead using them to pay for personal expenses, gambling, and paying off earlier investors. Russell also pleaded guilty to a parallel criminal action brought by the US Department of Justice (DOJ). Also on February 10, the CFTC announced a consent order against a Florida resident, Randall Carter, for a similar scheme in which Carter solicited $7.6 million from at least 28 victims who believed they were investing in a digital asset called “My Big Coin.” The consent order requires Carter to pay back $7.6 million in restitution. Carter was previously found guilty in a parallel criminal proceeding brought by the DOJ.
Department of State
DOS announces joint statement on North Korean crypto thefts. On January 14, the US Department of State (DOS) announced that the US, Japan, and the Republic of Korea issued a joint statement warning the blockchain technology industry about the ongoing cyber targeting and compromise of entities across the globe by the Democratic People’s Republic of Korea (DPRK). The joint statement emphasized the significant threat this DPRK program poses to the integrity and stability of the international financial system, noting that multiple thefts were attributed to the DPRK in 2024, including and not limited to $308 million from DMM Bitcoin and $50 million from Upbit. The joint statement stressed the need for private sector vigilance, advising private sector entities to thoroughly review governmental advisories and announcements previously issued to better inform mitigation of cyber threats and the risk of inadvertently hiring DPRK IT workers.
Virtual currency
Cryptocurrency firm pleads guilty to wash trading. On January 21, the DOJ announced that CLS Global FZC LLC, a UAE financial services firm “known in the cryptocurrency industry as a ‘market maker,’ has agreed to resolve criminal charges relating to its fraudulent manipulation of cryptocurrency trading volume.” CLS Global will plead guilty to one count of conspiracy to commit market manipulation and wire fraud and one count of wire fraud, and admit “that it agreed to provide market making services for the NexFundAI token that included ‘wash trading’ to fraudulently attract investors to purchase the token.”
CluCoin founder sentenced to 27 months for wire fraud. On February 14, the US Attorney’s Office for the Southern District of Florida announced that Austin Michael Taylor, founder of the cryptocurrency token CluCoin, had been sentenced to 27 months in prison and ordered to pay $1.14 million in restitution. Taylor pleaded guilty to using his social media following to solicit interest in his token CLU, which he represented would have a charitable focus. After the initial token sale, however, Taylor gambled away $1.14 million of sale proceeds. Investors in CLU were notified via an NFT sent to the wallet used to purchase CLU.
Alleged DeFi hacker charged with stealing $65 million. On February 3, the US Attorney’s Office for the Eastern District of New York announced an indictment against Andean Medjedovic for wire fraud, computer hacking, and attempted extortion in connection with the theft of $65 million from DeFi protocols KyberSwap and Indexed Finance. According to the announcement, Medjedovic’s scheme involved sophisticated manipulative trading techniques to exploit the automated market makers (AMMs) managing the liquidity pools. In the case of KyberSwap, he allegedly used borrowed cryptocurrency to create artificial prices, causing the AMMs to malfunction and allowing him to siphon off millions. Similarly, he allegedly manipulated the reindexing process of Indexed Finance’s liquidity pools to steal $16.5 million. To launder the stolen cryptocurrency, Medjedovic used bridge protocols to transfer assets between blockchains and employed a cryptocurrency mixer to conceal the origins of the funds. Prosecutors allege he even maintained a detailed playbook for moving large amounts of cryptocurrency and circumventing “know your customer” (KYC) procedures. Medjedovic remains at large.
Money laundering
KuCoin settles unlicensed money transmission charge for nearly $300 million. On January 27, the DOJ announced it had settled criminal charges against Peken Global, Limited, which is the Seychelles-based entity operating KuCoin, one of the largest cryptocurrency exchanges globally. According to the announcement, Peken pled guilty to operating an unlicensed money transmitting business and agreed to pay nearly $300 million in penalties and exit from the US market within two years. KuCoin violated anti-money laundering (AML) laws by failing to implement effective AML and KYC programs. The exchange also failed to report suspicious transactions and did not register with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). As a result, KuCoin facilitated billions of dollars in suspicious transactions, including proceeds from darknet markets, malware, ransomware, and fraud schemes.
Since its founding in 2017, KuCoin has grown to accumulate more than 30 million customers worldwide, with a significant presence in the US market, where it earned approximately $184.5 million in fees from 1.5 million registered users. Despite its substantial operations, KuCoin did not require customers to provide identifying information until August 2023, when it finally adopted a mandatory KYC program. However, this program was not retroactively applied to existing customers who only wanted to withdraw or close positions. The settlement also included criminal forfeitures and fines totaling over $297 million, with KuCoin's founders, Chun Gan and Ke Tang, agreeing to forfeit $2.7 million each. The US Attorney's Office praised the investigative work of the El Dorado Task Force and Homeland Security Investigations in bringing this case to a resolution.
For more information on litigation against KuCoin, see our prior article, and our December 2023 and March 2023 issues.
STATE
Crypto lending
DFPI settles with SALT crypto lending platform. On December 23, 2024, the California Department of Financial Protection and Innovation (DFPI) announced entry of a consent order with SALT Lending LLC to resolve the DFPI’s investigation into SALT’s crypto-backed lending program. Under the order, SALT agreed to make $162,800 in borrower refunds and pay $137,500 in penalties based on 342 loans made to 151 California residents over a 3-year period starting in November 2019. The loans included crypto and fiat money loans with crypto collateral, made to consumers and commercial borrowers. The DFPI cited SALT for violations of the California Financial Law, including for failing to adequately consider borrowers’ ability to repay their loans; understating the annual percentage rates for consumer loans and making false and misleading representations about those rates; charging undisclosed administrative fees to borrowers; and failing to consistently maintain the required net worth of at least $25,000. SALT is required by the order to send notices to California borrowers with their refund amount and instructions on how to obtain it, and, if applicable, information for closing active loans. SALT must also meet stringent underwriting requirements, deliver risk disclosures, and provide other consumer protections.
SPOTLIGHT ON INTERNATIONAL DEVELOPMENTS
Luxembourg's new law: A game changer for crypto assets & Green Bonds? The Law of 6 of February 2025 incorporates key European regulations on crypto assets and European Green Bonds, updating Luxembourg’s legal framework to align with EU standards. These developments position Luxembourg as a leading jurisdiction in regulatory compliance and innovation. These reforms not only align Luxembourg’s legislation with evolving EU standards, they also reinforce its commitment to market integrity, consumer protection, and sustainability. By integrating crypto assets, green finance, and enhanced AML and counter-terrorism financing (CFT) measures into a cohesive regulatory framework, Luxembourg is strengthening its position as a forward-looking global financial hub. Read more.
DLA PIPER NEWS
- The Financial Times recognizes DLA Piper as one of the Most Innovative Law Firms in North America.
- The Legal 500 ranks DLA Piper Tier 1 in FinTech: Crypto. DLA Piper was also ranked in Tier 2 for FinTech, and Margo Tank was ranked as a “Leading Individual.”
- Chambers FinTech Legal ranks DLA Piper in four categories including Band 2 for Blockchain and Digital Assets, and Band 3 for Payments and Lending, with Margo Tank individually recognized in Blockchain and Digital Assets and Payments and Lending.
- DLA Piper’s Commodities, Digital Assets, and Carbon Compliance and Enforcement team draws on decades of collective experience in the commodities and securities industry to help companies navigate new and complex commodities enforcement matters, including those related to agriculture, metals, energy, digital assets, and carbon/sustainable commodities, among others.
RECENT AND UPCOMING EVENTS
DLA Piper attorneys will present at the following:
- DLA Piper is presenting the 2nd Annual Global Digital Forum – Financial Services Evolution or Revolution? on February 25 from 12:00 to 19:30 GMT at the DLA Piper London office and virtually. The forum is co-organized with Global Digital Finance, and will cover the opportunities that digital finance brings, spanning key jurisdictions and a range of topics including digital bonds, real-world asset tokenization, stablecoins, DeFi, AI, and digital asset litigation, as well as the policy landscape in agenda-setting regions such as the UK, US, EU, and the Middle East. The keynote address will be presented by Baroness Kay Swinburne. Prior to her current legislative, advisory, and financial services consulting roles, Baroness Swinburne had a successful career in financial services both before and after being elected to the European Parliament (2009-2019). She also served as a leading EU legislator and Vice Chair of the Economics and Monetary Affairs Committee, shaping EU and global financial services legislation.
- David Stier will speak alongside other industry experts at the 21st Puerto Rican Symposium of Anti-Money Laundering in San Juan, Puerto Rico, on February 21 on a panel titled, “Anti-Money Laundering Under a New US Administration: Policy Shifts and Market Impact.”
PUBLICATIONS
- DLA Piper published its global financial services report, Financial Futures: Disruption in US and Global Financial Services, after asking nearly 800 financial services decision makers around the world about key disruptors impacting senior leaders in financial institutions and fintechs. Check out our report and read about the challenges and opportunities that AI, digitization, and ESG pose for the financial services industry.
- In the book, Banking [on] Blockchain: A Legal and Regulatory Primer, published by the American Bar Association, David Stier, Emily Honsa Hicks, and Eric Hall co-authored a chapter on anti-money laundering (AML)/know your customer (KYC) requirements and the Bank Secrecy Act (BSA), as well as provided general editorial assistance on other chapters. The book is a comprehensive guide to the legal and regulatory landscape surrounding the use of blockchain technology, decentralization, and digital assets within the financial services, and offers guidance on how financial institutions may navigate the complex regulatory environment.
- Cryptocurrency and Digital Asset Regulation, published by the American Bar Association and co-edited by Deborah Meshulam and Michael Fluhr, includes chapters by Meshulam, Fluhr, and Margo Tank.
Read more
SEC enforcement actions highlight anti-money laundering reporting focus for financial gatekeepers
CFTC issues advisory on use of AI in regulated markets
Fifth Circuit vacates stay of Corporate Transparency Act injunction, again putting deadlines on hold
Contacts
Learn more about our Blockchain and Digital Assets practice by contacting any of our editors:
Contributors to this issue
