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.
SEC Eases Path for Advisers To Custody Crypto With State Trusts
On Sept. 30, the Securities and Exchange Commission (SEC) issued a no-action letter granting relief to registered investment advisers (RIAs) and registered funds (funds) that seek to use state-chartered trust companies (state trust companies) to custody crypto assets and cash and/or cash equivalents, consistent with the requirements of the Investment Advisers Act of 1940, as amended, and subject to certain conditions. Among other conditions, for RIAs and funds to rely on the no-action relief, the RIA or fund must have a reasonable basis to believe that the state trust company is authorized by its state banking authority and has established policies and procedures to safeguard crypto assets, and the RIA or fund must enter into a custodial services agreement whereby the state trust company is prohibited from lending or pledging customer crypto assets without written consent (i.e., client or fund consent) and assets are segregated from the state trust company’s proprietary assets. This marks a significant shift in regulatory posture, offering clarity to advisers navigating crypto custody rules. SEC Commissioner Hester Peirce welcomed the move as a long-overdue modernization. For additional information, please see Lowenstein Sandler’s client alert here. See the no-action letter here and Peirce’s statement here.
SEC Clears DePIN Token in No-Action Letter
On Sept. 29, the SEC issued a no-action letter confirming that Decentralized Physical Infrastructure Network (DePIN) tokens fall outside its jurisdiction when not offered as investment contracts. The letter was issued by the Division of Corporation Finance in response to a request from the DePIN Foundation. It clarified that tokens used to incentivize participation in decentralized wireless, energy, and mobility networks do not meet the definition of securities under the Howey test as long as they are utility driven and not marketed for speculative gain. This is the first time the SEC has formally addressed the regulatory status of DePIN tokens. Peirce praised the decision as a win for Web3 infrastructure. The move reflects a broader deregulatory posture of the SEC and could accelerate adoption of tokenized physical infrastructure across the U.S. See the no-action letter here and Peirce’s statement here.
SEC Halts Trading of Crypto Treasury Firm QMMM
On Sept. 26, the SEC issued an order temporarily suspending trading in securities of QMMM Holdings Ltd., citing concerns over potential stock manipulation. QMMM, a Hong Kong-based digital advertising firm listed on Nasdaq via a Cayman Islands holding entity, recently announced plans to establish a $100 million diversified cryptocurrency treasury targeting bitcoin, Ethereum, and Solana. Following the announcement, its stock surged 959% in under three weeks. The SEC stated that “unknown persons” may have promoted QMMM shares on social media, potentially inflating the stock’s price and volume artificially. The trading halt is set to remain in effect until 11:59 p.m. EDT on Oct. 10. The order underscores heightened regulatory scrutiny of crypto-linked equities and the risks of speculative hype driven by online promotions. See the SEC’s order here.
A New Era of Coordination for U.S. Financial Regulation
On Sept. 29, in his address at the SEC-CFTC Joint Roundtable on Regulatory Harmonization Efforts, SEC Chairman Paul Atkins emphasized the urgent need for greater collaboration between the SEC and the Commodity Futures Trading Commission to address the challenges of regulatory fragmentation that have hindered financial innovation and driven investment abroad. While reaffirming that any merger of the two agencies would require congressional action, Atkins calls for harmonized oversight, reduced duplication, and clearer regulatory frameworks to support American market leadership in the digital age. Framing the moment as a turning point, he stressed that joint agency coordination, not consolidation, is the path forward to ensure the U.S. remains at the forefront of financial technology and investor protection. See Atkins’ full statement here.
Wisconsin Lawmakers Introduce Bill To Exempt Crypto Businesses From Money Licenses
On Sept. 29, Wisconsin lawmakers introduced Assembly Bill 471, which would exempt individuals and business engaging in certain digital asset activities from the state’s money-transmitter licensing requirements. Specifically, the bill provides that no license is required for activities such as mining, staking, and developing blockchain software. Further, no license is required for transferring digital assets or accepting crypto payments, provided the activity does not involve converting digital assets into legal tender or accepting deposits. The bill further restricts state and local authorities from interfering with individuals or businesses engaged in these activities, including the use of self-custody wallets. The bill reflects a growing state-level trend toward regulatory clarity and support for decentralized technologies and digital assets. The bill has been referred to the Wisconsin Committee on Financial Institutions and awaits further action. See the full text of the bill here.
Massachusetts To Hold Hearing on Bitcoin Reserve Bill
On Sept. 26, Massachusetts lawmakers announced that the state will hold a public hearing on Oct. 7 to consider a proposed bill that would allow the state to establish a bitcoin reserve. The legislation, first introduced in January of this year, would authorize the commonwealth to allocate a portion of its budget surpluses into bitcoin, framing it as a hedge against inflation and a diversification tool for public assets. If passed and signed into law, Massachusetts would become the first Democratic-led state to adopt a bitcoin reserve. The initiative follows similar moves in Texas and New Hampshire and coincides with a growing federal interest in digital assets. See the proposed bill here.
Kazakhstan Launches Crypto Reserve With BNB
On Sept. 29, Kazakhstan officially launched its first state-backed cryptocurrency reserve, the Alem Crypto Fund, with Binance Coin (BNB) as its inaugural digital asset. The announcement came from the Ministry of Artificial Intelligence and Digital Development, with fund management assigned to Qazaqstan Venture Group under the Astana International Financial Centre. Binance Kazakhstan, a licensed local subsidiary of the global exchange, will serve as the fund’s strategic partner. While the size of the initial BNB investment remains undisclosed, the fund aims to build long-term holdings of digital assets and establish national reserves. The launch follows Kazakhstan’s rollout of its tenge-backed stablecoin, KZTE, and plans for a crypto-friendly pilot zone known as CryptoCity. In connection with this action, President Kassym-Jomart Tokayev has additionally called for legislation to formalize a broader strategic crypto reserve by 2026. See the press release here.
