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.
Senate Banking Committee Approves CLARITY Act in Bipartisan 15–9 Vote; Debate Continues Over Illicit Finance and Ethics Provisions
On May 14, the Senate Banking Committee voted 15–9 to advance H.R. 3633, the Digital Asset Market Clarity Act of 2025, sending the most sweeping federal crypto market structure bill to date to the full Senate. The bipartisan tally cleared the Committee ahead of the Memorial Day recess deadline that lawmakers had warned would otherwise reset the legislative calendar. On May 12, Chairman Tim Scott, together with Sens. Cynthia Lummis and Thom Tillis, had released the updated substitute amendment text (EHF26374) that served as the basis for the markup, reflecting continued negotiations with Democratic colleagues and extensive input from lawmakers, regulators, law enforcement, financial institutions, innovators, and consumer advocates. Despite this bipartisan effort, Ranking Member Sen. Elizabeth Warren and Committee Democrats issued a “National Security Advisory” on May 14 criticizing the bill for failing to address key illicit finance vulnerabilities exploited by criminals, terrorists, and foreign adversaries, arguing the legislation would “make the problem worse, not better” by exempting DeFi businesses from anti-money laundering requirements and failing to close the “Tornado Cash loophole.” Warren had also separately raised financial stability, illicit finance, and consumer protection concerns tied to Meta’s integration of stablecoins on its platform—issues that featured prominently during the markup. Building on these critiques, Warren broadened her attack at the markup itself, charging that the bill was “written by the crypto industry, for the crypto industry” and would tear a hole in securities laws, preempt state-level consumer protections, allow banks to load up on risky crypto assets, deepen national security vulnerabilities, and do nothing about what she described as Trump administration crypto corruption. Looking ahead, the bill must still be merged with a parallel version approved by the Senate Agriculture Committee, and negotiators must resolve an unfinished conflict-of-interest/ethics provision before a floor vote, where 60 votes—and meaningful Democratic support—will be needed to pass. The minority’s national security advisory is available here.
The markup text–the Scott-Lummis-Tillis substitute, designated EHF26374–proposed (i) a new Securities Act § 4B disclosure regime for “ancillary assets,” with secondary trades in network tokens predating the act carved out of securities treatment and the SEC barred from using anti-fraud authority to “treat a network token as a security or regulate secondary market trading”; (ii) a new Securities Act § 27C shielding software developers engaged in validation, sequencing, or similar noncustodial activities from securities liability and preempting conflicting state securities, commodities, or digital asset laws; and (iii) a stablecoin title that endorses “activity-based rewards and incentives” as “critical to enabling innovation,” while prohibiting any covered party other than registered permitted or foreign payment stablecoin issuers from paying interest or yield to U.S. customers “solely in connection with” stablecoin holdings or in a manner “economically or functionally” equivalent to a deposit. The bill text is available here.
However, the stablecoin yield language has drawn intense engagement from the banking industry. On May 8, the American Bankers Association, Bank Policy Institute (BPI), Consumer Bankers Association, Financial Services Forum, Independent Community Bankers of America, and National Bankers Association sent a joint letter to Scott and Warren urging “important technical refinements” to the Section 404 stablecoin yield revised language. The trade groups acknowledged that the revision improves the original Section 404 text considered at the January markup, but warned that the proposal still includes “exceptions that will enable evasion of the intended prohibition and incentivize customers to hold and grow stablecoin balances at the expense of deposits.” They support the bill’s distinction between permissible “rebate or incentive” rewards tied to the acceptance or use of payment stablecoins and prohibited interest-like payments on stablecoin balances or other stores of value. In a related statement on May 4, the same coalition flagged that Section 404 as drafted would permit exchanges to pay interest or yield through “membership program” structures and to calculate “permissible rewards” by reference to duration, balance, and tenure–a framework they characterized as a “significant loophole.” Industry groups made a final weekend lobbying push urging members to press for tighter stablecoin reward limits before the hearing, but the yield compromise brokered by Sens. Tillis and Angela Alsobrooks ultimately held through committee passage. The joint letter is available here, and the BPI statement is available here.
SEC Leadership Lays Out Crypto Market Structure Priorities and Enforcement Refocus in May 8 Speeches
On May 8, three Securities and Exchange Commission (SEC) commissioners sketched the next phase of the agency’s crypto and enforcement agenda. At the Special Competitive Studies Project AI+ Expo, Chairman Paul S. Atkins outlined a four-part agenda for fitting on-chain trading systems within the federal securities regulatory perimeter, anticipating that the commission will consider a “limited innovation pathway” in the near future while pursuing notice-and-comment rulemaking to address how the “exchange” definition applies to on-chain trading systems. Atkins also flagged the need to revisit the broker and dealer definitions–building on a recent staff statement on software interfaces–through possible exemptive rulemaking and to address the “clearing agency” definition where settlement is “near-instantaneous and counterparty risk is managed algorithmically.” He previewed work to clarify Securities Act and Investment Advisers Act treatment of “crypto vaults,” which he described as on-chain software applications that allow users to passively earn yield by deploying assets into on-chain yield-generating opportunities. Atkins’ remarks are available here.
In separate remarks the same day, Commissioner Hester M. Peirce pushed back against reflexive regulation of crypto-adjacent retail trading and product innovation. She observed that retail investors are increasingly trading a wide mix of asset classes–including crypto, gold, silver, perpetual futures, active exchange-traded funds (ETFs), and prediction markets–and that “[m]any of these assets are not securities, but they are finding their way into ETFs as well,” with “[w]ell-designed user interfaces” and artificial intelligence trading bots making participation easier than ever. She cautioned that even where the commission has authority to act, “regulations often impose heavy and persistent costs,” constrain investor choice, are “frustratingly inflexible in the face of changing circumstances,” and tend to be less informed than “market participants … [who] generally are better informed about the facts on the ground than a regulator.” Atkins’s remarks are available here, and Peirce’s remarks are available here.
Consensys Asks SEC for Commission-Level Safe Harbor for Noncustodial Wallet Interfaces
On May 11, Consensys Software Inc.–the developer of the MetaMask noncustodial wallet–filed a comment letter with the SEC regarding the commission’s March 2026 interpretive release on the Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets. Consensys warned that the release’s position–that an investment contract can persist across secondary-market transactions in a non-security crypto asset until issuer promises are fulfilled or publicly abandoned–creates a category of activity unaddressed by the Division of Trading and Markets’ April 2026 staff statement on covered user interfaces. Consensys argued that interface providers cannot reliably determine, in real time, whether a non-security crypto asset is currently “attached” to an investment contract because that turns on issuer-side facts that the interface generally has no means to discover or verify. The letter requests that the commission–using its Section 36 exemptive authority under the Securities Exchange Act together with its interpretive authority–adopt a safe harbor confirming that providers of self-custodial, user-directed interfaces need neither register as broker-dealers under Section 15(b) nor comply with the staff statement merely because the interface makes discoverable or user-initiable transactions in non-security crypto assets to which an investment contract may have attached and not yet separated. The comment letter is available here.
FinCEN and OFAC Flag Iranian Stablecoin Use
On May 11, the Financial Crimes Enforcement Network (FinCEN)–joined by the Office of Foreign Assets Control (OFAC), the FBI, and the Cybersecurity and Infrastructure Security Agency–issued an “Alert on the Use of Front Companies and Other Mechanisms by Iran’s Islamic Revolutionary Guard Corps (IRGC),” which dedicates significant attention to digital asset typologies. The alert finds that “[d]igital asset transactions serve as one leg of Iran’s shadow banking network” and that Iranian facilitators are “likely to use stablecoins” because of their liquidity, ease of settlement, and exchange rate stability, including by minting and moving large volumes between major issuers and by creating proprietary stablecoins such as USDZ, associated with OFAC-designated issuer Zedxion. The alert sets out red flags for U.S. financial institutions, including stablecoin payments with unclear sources of funds tied to high-risk jurisdictions, unusual stablecoin minting activity by foreign trust company customers, and direct or indirect transactions with digital asset addresses attributed to Iranian entities. The alert is available here.
ECB’s Lagarde Rejects EUR Stablecoin Push, Calls $300B Market a Stability Risk
On May 8, European Central Bank (ECB) President Christine Lagarde used a keynote at the Banco de España LatAm Economic Forum in Roda de Bará, Spain, to push back against calls for Europe to promote euro-denominated stablecoins, arguing that “the case for promoting euro-denominated stablecoins is far weaker than it appears.” Lagarde noted that stablecoins have grown from less than $10 billion six years ago to more than $300 billion, with nearly 90 percent of the market controlled by two major crypto firms and overwhelmingly denominated in U.S. dollars. She framed the U.S. GENIUS Act as not merely a consumer protection measure but also as an instrument the U.S. administration “explicitly describes … as a tool to ensure ‘the continued global dominance of the U.S. dollar’ and to cement demand for US Treasuries.” Lagarde flagged financial stability risks and warned of feedback loops between mass redemptions and underlying asset markets as stablecoin use grows, “particularly where issuers are non-banks.” She concluded that euro-denominated stablecoins operating under Markets in Crypto-Assets Regulation could generate additional global demand for euro-area safe assets but that the trade-offs–financial stability risk and erosion of monetary control–make the case unfavorable. The speech is available here.
First Land-Backed Digital Security Launched in Japan
On May 12, Mitsui & Co. Digital Asset Management announced the launch of Japan’s first digital security backed solely by land rights, tokenizing the leasehold interest beneath a large shopping center in Saitama City operated by AEON Co., Ltd.–Japan’s largest retailer by revenue. The security tokens are issued through the ALTERNA platform, which operates on a permissioned blockchain called “ibet for Fin,” and are structured as beneficiary securities under a trust arrangement that complies with Japan’s Financial Instruments and Exchange Act. Unlike traditional real estate securities that expose investors to tenant risk, building maintenance, and depreciation, the product isolates only the 50-year fixed-term ground lease under which AEON pays fixed monthly rent to use the land. The offering also includes a loyalty point component: investors holding at least 10 units receive 500 WAON points annually through AEON’s prepaid card reward network, redeemable at AEON stores. The token offering information is available here.
