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.
New Draft of CLARITY Act Includes Ethics Provisions
On July 22, the U.S. Senate released a new draft of the Digital Asset Market Clarity Act (CLARITY Act), including ethics provisions which would prohibit a covered individual (e.g., the president and other federal officers) from issuing or sponsoring a digital asset in exchange for consideration. The new draft also includes a safe harbor if a covered individual places any direct interest in a digital asset issued or sponsored in a qualified blind trust, divests the direct interest, or both. The draft of the CLARITY Act follows after White House officials reportedly reached an agreement on the ethics provisions with Republican Senators Cynthia Lummis (R-WY) and Bernie Moreno (R-OH). If the current draft of the CLARITY Act is passed, effectively, federal officials, as well as their spouses or employees, would be banned from issuing or sponsoring any “digital asset” while serving in their roles. Notably, the added ethics provisions are set to sunset on January 20, 2029. See the new draft of the CLARITY Act here.
SEC Commissioner Hester Peirce Releases Statement Regarding Crypto Vaults
On July 22, Securities and Exchange Commission (SEC) Commissioner Hester Peirce released a statement titled, “Headstands and Summervaults: A Statement on Crypto Vaults and Lending Strategies” (the Statement), noting that moving securities-related activity on-chain does not exempt it from regulation. Peirce applies that principle to crypto “vaults” and on-chain lending strategies, stating that these tools can help asset holders generate yield but may implicate securities laws depending on their design, management, and use of securities or security-like instruments. As described in the Statement, vaults facilitate asset deployment via smart contracts and allocate deposited assets to yield-generating activities such as staking and lending. According to Peirce, vaults and lending strategies could implicate federal securities laws because a vault could be an investment contract, an investment company, a unit investment trust, and/or managed accounts. Additionally, Peirce notes that the involvement in managing vaults and lending strategies could be construed as providing investment advice depending on the specific facts and circumstances. See the Statement here.
Digital Chambers Sues Illinois Over Crypto Tax Law
On July 21, the Chamber of Digital Commerce (Digital Chambers) filed a lawsuit against the Director of the Illinois Department of Revenue and Illinois Attorney General in the Circuit Court of Sangamon County, Illinois Circuit Court of the Seventh Judicial Circuit, challenging the Illinois Digital Asset Tax Act (Act) which imposes a 0.2% tax on the exchange, transfer, or custody of digital assets involving Illinois customers. Digital Chambers argues that the Act treats economically identical assets differently solely because ownership is recorded or transferred using blockchain technology. Digital Chambers further alleges that the Act is vague, overbroad, and difficult to administer because it does not define key concepts such as “value,” “storing,” customer location, or when routine blockchain operations constitute taxable events. The complaint seeks declaratory and injunctive relief on several grounds, including alleged violations of the Illinois Uniformity Clause, state and federal due process protections, the Dormant Commerce Clause, and federal preemption under the Internet Tax Freedom Act. See the press release here and a copy of the complaint here.
BitMEX To Permanently Shut Down In September 2026
On July 23, BitMEX announced its plan to sunset the BitMEX Exchange on September 23, 2026. Effective immediately, new account openings have stopped, and current users must close positions before the September deadline when trading activity halts. BitMEX was founded in 2014 and is credited with inventing and popularizing the 100x leverage perpetual swap. Asset withdrawals will continue after the deadline. The announcement follows after years of regulatory scrutiny and BitMEX’s guilty plea and $100 million fine for violations of the Bank Secrecy Act. See the announcement here.
Russia Passed New Law Enabling Retail Crypto Trading
On July 21, Russia’s State Duma adopted a new law governing retail trading of crypto assets through central bank-regulated intermediaries. The new law sets forth a regulatory framework to enable non-qualified and qualified investors to trade crypto assets; however, residents may not use crypto assets for domestic payments. Under the new law, non-qualified investors will be permitted to purchase liquid crypto assets subject to limitations and provided they pass a test (approximately $3,800 a year). Qualified investors may trade above the threshold, but are subject to the same testing requirements. The law also permits crypto asset exchange services and digital custodians to provide crypto asset services under a licensing framework.
