Lowenstein Crypto advises leading digital asset and cryptocurrency projects, exchanges, and trading firms. Our practice covers regulatory advice, transactions and structuring advice, investigations, and adversarial matters including commercial disputes, bankruptcy, and related litigation. As these markets continue their rapid growth and market participants continue to evolve and mature their businesses, we are providing this weekly digest as a resource that highlights and summarizes a selection of key recent legal regulatory developments.
CFTC Launches Digital Assets Pilot Program
On Dec. 8, Caroline D. Pham, acting chair of the Commodities Futures Trading Commission (CFTC), announced a digital assets pilot program enabling certain digital assets to be used as collateral in derivatives markets. Pham stated that “Americans deserve safe U.S. markets as an alternative to offshore platforms,” adding that the program establishes guardrails to protect customer assets and enhances CFTC monitoring and reporting. The Market Participants Division of the CFTC also issued a no-action position permitting futures commission merchants (FCMs) to accept non-securities digital assets, including payment stablecoins, as customer margin collateral, with initial limits to bitcoin, ether, and USDC and heightened weekly reporting for the first three months. The CFTC states that “the position provides market participants with regulatory clarity regarding the application of the segregation and capital requirements to FCMs that accept these digital assets as margin collateral while highlighting the importance of FCMs’ maintaining robust risk management practices.” The full press release is available here.
New York Adopts the 2022 Amendments to the UCC
On Dec. 5, New York Governor Kathy Hochul signed Assembly Bill 3307-A/Senate Bill 1840-A, adopting the 2022 Uniform Commercial Code (UCC) amendments, including the new Article 12 on controllable electronic records and related updates to Article 9, thereby aligning New York with the modern national framework for secured transactions involving digital assets. The law clarifies property, transfer, control, and priority rules for certain digital assets and updates perfection and priority standards for security interests, aiming to reduce legal uncertainty and support lending and trading activity. Its enactment has immediate implications for how digital-asset-related transactions are structured, documented, and reviewed, prompting market participants to review existing and future deals, evaluate perfection strategies, and ensure policies and agreements reflect the updated statutory framework. See a Lowenstein Sandler client alert detailing the enactment here and the full legislative text here.
OCC Confirms National Banks May Conduct Riskless Principal Crypto Asset Transactions
On Dec. 9, the Office of the Comptroller of the Currency (OCC) released Interpretive Letter 1188, which affirmed, through Interpretive Letter 1188, that national banks may legally engage in riskless principal crypto asset transactions, where a bank briefly takes ownership of a crypto asset solely to facilitate an immediate, offsetting customer trade, because the activity is considered part of the business of banking under 12 U.S.C. § 24 Seventh. The letter explains that these transactions mirror long-standing brokerage and intermediation practices, benefit customers by enabling regulated access to crypto asset markets, and involve risks comparable to those already managed in securities and derivatives activities. The OCC found that such transactions are a logical extension of existing bank authorities, including custody and other crypto-related services, and it noted that banks must conduct them safely, soundly, and in compliance with applicable laws, with supervisory review to continue as these activities develop. See the full Interpretive Letter here.
FinCEN Penalizes Paxful for Willful Violations of the Bank Secrecy Act
On Dec. 9, the Financial Crimes Enforcement Network (FinCEN) issued a $3.5 million civil penalty against Paxful Inc. and Paxful USA Inc. for willful violations of the Bank Secrecy Act, citing the platform’s failure to register as a money services business, implement an effective anti–money laundering (AML) program, and file required suspicious activity reports. According to FinCEN, Paxful facilitated over $500 million in suspicious transactions involving high-risk jurisdictions and illicit actors, though the agency also noted the company’s later remediation efforts and leadership changes as mitigating factors in determining the penalty. The action underscores regulatory expectations for risk-based AML compliance across financial institutions, including those handling virtual assets, and highlights the importance of customer verification, monitoring procedures, and timely remediation. FinCEN also reiterated the availability of its whistleblower incentive program for individuals providing information leading to major enforcement actions. See the Justice Department’s press release here.
AFT Warns Senate That Crypto Market Bill Could Threaten Public Pensions
On Dec. 8, the American Federation of Teachers (AFT) sent a letter to the Senate Banking Committee urging leaders to pause work on the Responsible Financial Innovation Act, arguing that the crypto market structure proposal could endanger public sector pensions by weakening long-standing securities protections and allowing riskier digital assets into retirement portfolios. The union said the bill treats volatile and legally uncertain crypto products as if they were established financial instruments, enables companies to place tokenized stock on blockchains without traditional registration and oversight, and reduces regulators’ ability to police intermediaries and bad actors. The warning comes as the Senate seeks to define regulatory boundaries between the Securities and Exchange Commission and the CFTC and finalize federal rules for crypto markets amid political uncertainty, ongoing revisions, and efforts by sponsors to complete a draft before the holiday recess. See the full letter available here.
Federal Judge Grants Kalshi Reprieve from Connecticut Cease and Desist Order
On Dec. 8, U.S. District Judge Vernon D. Oliver ordered the Connecticut Department of Consumer Protection (DCP) to refrain from taking enforcement action against KalshiEx LLC (Kalshi) while the court considers Kalshi’s request for temporary relief. The order followed a motion Kalshi filed last week seeking to halt the DCP’s cease and desist action. The cease and desist action accused the prediction markets exchange of “conducting unlicensed online gambling, more specifically sports wagering, in Connecticut through its online sports event contracts.” The order requires the DCP to file a response to the company by Jan. 9, 2026. Kalshi’s motion for preliminary injunction is available here.
ASIC Announces New Digital Assets and Payments Sector Relief
The Australian Securities & Investment Commission (ASIC) has introduced new class relief measures aimed at supporting innovation and growth in Australia’s digital assets and payments sectors, exempting intermediaries from needing separate Australian Financial Services, market, or clearing and settlement facility licenses when handling eligible stablecoins and wrapped tokens, and permitting providers to hold digital assets financial products in omnibus accounts with proper recordkeeping and reconciliation. The updates, foreshadowed in ASIC’s October release of INFO 225, follow industry-supported consultations that requested clearer definitions and broader eligibility. In response, ASIC expanded eligibility to include tokens issued by entities that have applied for the relevant license and provided further guidance in accompanying explanatory statements. The full press release and additional resources are available here.
South Korea Considering No-Fault Liability for Crypto Exchanges
On Dec. 8, South Korea’s Financial Services Commission proposed rules under the Act on Protection of Virtual Asset Users that would impose no-fault liability for crypto exchanges in the event of incidents such as hacking or computer failures. Under the proposed rules, crypto exchanges would also be required to purchase liability insurance or set aside reserves of at least 5 percent of customers’ virtual assets stored in hot wallets. The proposal comes shortly after a cyberattack on Upbit, the country’s largest crypto exchange, in which users collectively lost approximately $28 million in Solana-denominated tokens. The full press release is available here.
