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.
OCC Issues Proposed Rule to Implement the GENIUS Act
On Feb. 25, the Office of the Comptroller of the Currency (OCC) issued a 376-page Notice of Proposed Rulemaking (Bulletin 2026-3) to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) with respect to federal qualified payment stablecoin issuers. The proposed rule goes beyond the GENIUS Act's statutory prohibition on issuers paying yield or interest “solely in connection with the holding, use, or retention” of a payment stablecoin by introducing a rebuttable presumption that the yield ban is violated where (a) an issuer’s affiliate or related third party has a contract or arrangement to pay interest or yield to a holder of any payment stablecoin issued by the issuer solely in connection with the holding, use, or retention of such payment stablecoin; or (b) the issuer has a contract or arrangement with an affiliate or related third party to pay interest or yield to that affiliate or third party for this purpose. Additionally, the proposed rule introduces several other contentious provisions: (i) a proposed $5 million minimum capital floor for de novo stablecoin issuers; (ii) a new “capital and operational backstop” framework, accompanied by amendments to existing bank capital adequacy standards under 12 CFR 3 and prompt corrective action regulations under 12 CFR 6; and (iii) the decision to bifurcate BSA/AML and OFAC sanctions compliance into a separate, forthcoming rulemaking in coordination with the Treasury Department. Comments are due 60 days from publication in the Federal Register. The OCC bulletin is available here; the proposed rule is available here.
SEC Grants Exemptive Order Permitting 24/7 Trading of Tokenized Money Market Fund Shares
On Feb. 23, the Securities and Exchange Commission’s Division of Investment Management issued an exemptive order granting WisdomTree and its affiliates relief under sections 6(c) and 17(d) of the Investment Company Act of 1940. The order exempts the WisdomTree Government Money Market Digital Fund (WTGXX) from Section 22(d) and rule 22c-1 of the act to permit registered broker-dealers to purchase and sell tokenized fund shares to investors at a fixed $1 per share on a principal basis on a continuous 24/7 basis, with instant settlement via stablecoin–initially USDC. In connection with the order, WisdomTree Securities received FINRA approval to conduct principal trading of registered fund shares, and WisdomTree introduced continuous dividend accrual using blockchain time stamps to allocate income based on intraday wallet holding periods. The exemptive order is available here; the WisdomTree press release is available here.
Federal Reserve Proposes Rule To Eliminate Reputation Risk From Bank Supervision
On Feb. 24, the Federal Reserve proposed a rule that would formally eliminate “reputation risk” as a factor in bank supervision, codifying its previous actions to remove the concept from its oversight framework. The proposal, open for a 60-day public comment period, would bar supervisors from pushing banks to sever ties with politically disfavored businesses, including crypto firms–a practice widely cited as contributing to the “debanking” of crypto companies and insiders. The move follows the Fed’s June 2025 announcement removing reputational risk from examination programs and the October 2025 joint proposed rulemaking by the OCC and FDIC to eliminate reputation risk as a supervisory factor. The press release is available here.
OFAC Sanctions Russian Company for Purchasing Stolen US Technology Using Cryptocurrency
On Feb. 24, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Operation Zero, a Russian company, and the individuals behind it for buying stolen cyber tools for millions of dollars in cryptocurrency and reselling those technologies, which were created for the exclusive use of the U.S. government and select allies. OFAC designated the following persons and entities: (i) Sergey Sergeyevich Zelenyuk, the owner of Operation Zero; (ii) Special Technology Services LLC FZ (STS), an affiliated UAE company controlled by Zelenyuk; (iii) Marina Evgenyevna Vasanovich (Vasanovich), Zelenyuk’s assistant; (iv) Azizjon Makhmudovich Mamashoyev (Mamashoyev) and Oleg Vyacheslavovich Kucherov, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods and services to or in support of, Zelenyuk; and (v) Advance Security Solutions, another exploit brokerage firm created by Mamashoyev, for being owned or controlled by, or having acted or purported to act for or on behalf of, directly, Mamashoyev. Secretary of the Treasury Scott Bessent stated that the “Treasury will continue to work alongside the rest of the Trump Administration to protect sensitive American intellectual property and safeguard our national security.” The sanctioned individuals are said to be the first persons sanctioned under the Protecting American Intellectual Property Act. The press release is available here.
OCC Grants Crypto.com Conditional Approval for National Trust Bank Charter
On Feb. 23, Crypto.com announced that it has received conditional approval from the OCC to charter Foris Dax National Trust Bank, d/b/a Crypto.com National Trust Bank. Through the planned trust bank, Crypto.com aims to provide institutional-grade custodial services–including custody; staking of assets across various blockchains and digital asset protocols, including Cronos; and trade settlement–as a federally regulated national trust bank subject to OCC oversight. Crypto.com submitted its application to the OCC in October 2025. The announcement is available here.
Senator Opens Inquiry Into Binance Over Iran-Linked Crypto Transfers
On Feb. 24, U.S. Sen. Richard Blumenthal, D-Conn., Ranking Member of the Senate Permanent Subcommittee on Investigations, wrote to Binance co-CEO Richard Teng demanding records related to the exchange’s alleged role in facilitating $1.7 billion in cryptocurrency transfers to entities linked to the Iranian government, including the Islamic Revolutionary Guard Corps and Yemen’s Houthi militants. Blumenthal called Binance “a repeat offender” and noted that the exchange’s 2023 guilty plea for sanctions and AML violations, its $4.3 billion settlement, and the subsequent presidential pardon of founder Changpeng Zhao raise serious questions about the effectiveness of Binance’s compliance controls. Blumenthal’s letter is available here.
Pakistan Advances Comprehensive Crypto Regulatory Framework; PVARA Launches Regulatory Sandbox
Pakistan took two significant steps toward formalizing digital asset regulation during the week. On Feb. 20, the Pakistan Virtual Assets Regulatory Authority (PVARA) announced that it has formally approved and launched a Regulatory Sandbox for virtual assets, creating a live, supervised environment for testing real-world use cases, including tokenization, stablecoins, remittances, and on- and off-ramp infrastructure. Then, on Feb. 25, the Standing Committee on the Cabinet Secretariat of the Senate of Pakistan unanimously approved the Virtual Assets Bill 2025. The bill empowers PVARA to license and supervise virtual asset service providers, including crypto exchanges, digital wallets, and crypto coin issuers, and to regulate mining activities. PVARA’s announcement is available here, and the Virtual Assets Bill is available here.
South Korea’s FSC Reviews Increase of Cold Wallet Storage Requirement to 100 Percent for Crypto Exchanges
On Feb. 19, South Korea’s Financial Services Commission (FSC) disclosed in a formal written response to the National Assembly that it is reviewing a proposal to increase the mandatory cold wallet storage ratio for virtual asset exchanges from the current 80 percent to nearly 100 percent. The FSC stated that it will finalize the review while drafting subordinate regulations for the second phase of the country’s comprehensive virtual asset legislation, basing its decision on the operational realities of domestic crypto exchanges, prevailing international regulatory trends, and inspection results from the Financial Supervisory Service. The FSC’s press release page is available here.
Hong Kong To Issue First Stablecoin Licenses in March 2026
On Feb. 25, Hong Kong Financial Secretary Paul Chan Mo-po confirmed during the 2026-27 Budget Speech that Hong Kong will issue its first batch of stablecoin issuer licenses in March 2026 under the Stablecoins Ordinance, which took effect in August 2025. The Hong Kong Monetary Authority (HKMA) received 36 applications in the initial round and is currently finalizing its review, with Chief Executive Eddie Yue stating that only a “very small number” of licenses will be granted initially. The HKMA’s assessment focuses on use cases, risk management, AML measures, and the quality of backing assets. Licensed issuers must maintain minimum paid-up capital of HK$25 million, fully back stablecoins with high-quality liquid reserve assets at all times, guarantee par-value redemption within one business day, and be incorporated in Hong Kong with a physical management presence. The licensing regime covers both issuers operating in Hong Kong and overseas issuers of Hong Kong dollar-linked stablecoins, and it forms part of Hong Kong’s broader Web3 strategy to position the city as a regulated global digital asset hub. Later in 2026, the government plans to introduce additional legislation covering digital asset dealers and custodians. The speech is available here
UK FCA Selects Four Firms for Stablecoin Regulatory Sandbox Cohort
On Feb. 25, the UK Financial Conduct Authority (FCA) announced that it has selected four firms from a pool of 20 applicants to participate in a dedicated stablecoin cohort within its Regulatory Sandbox. The testing will focus primarily on stablecoin issuance, with the selected firms piloting a range of use cases including payments, wholesale settlement, and crypto trading. Testing is scheduled to begin in Q1 2026, and the FCA stated that findings will “help shape the UK’s final stablecoin rules later in 2026.” The FCA’s Regulatory Sandbox stablecoins cohort page is available here.
