Blockchain Legal Frameworks

🚨 The full text of the CLARITY Act dropped last night. Earlier today I shared a post outlining every single law enforcement or illicit finance related provision - about 20 in total. However, I am getting the most questions from law enforcement partners and friends about one section. SEC. 604 — the Blockchain Regulatory Certainty Act. The BRCA creates a limited exemption from money transmitting requirements for a "non-controlling developer or provider" — defined as someone who "does not have the legal right or the unilateral and independent ability to control, initiate upon demand, or effectuate transactions involving digital assets to which users are entitled, without the approval, consent, or direction of any other third party." Anyone with actual control over user funds falls outside the exemption. 🛑 Subsection (d) — new in this draft — preserves the application of § 1960(b)(1)(C) for any person that "acts with the specific intent to transfer, on behalf of another person, funds that are known by the initial person to be — (1) derived from a criminal offense; or (2) intended to be used to promote or support unlawful activity." Three elements: specific intent, a transfer made on behalf of another person, and knowledge that the funds are criminal. Respond to an email offering your support to move dirty money and you have demonstrated all three. You sit squarely within § 1960's reach. When I was a prosecutor, § 1960 was rarely the headline charge. It was the add-on or the lesser included offense. The real crime was money laundering conspiracy. What subsection (d) establishes is that the knowing, intentional facilitation of criminal funds on behalf of another person — the conduct at the core of a money laundering conspiracy — remains fully prosecutable under § 1960. The BRCA defines the scope of the developer exemption. Subsection (d) defines its ceiling. There is a second enforcement dividend that receives less attention. Legal clarity pulls developers inside the regulated ecosystem — into AML programs, suspicious activity reporting, compliance infrastructure, and the ability to respond to legal process. A gray market of developers building outside the regulated framework is far worse for law enforcement than a compliant industry with visibility and obligations. This is why CLARITY is so important for both developers and law enforcement.

The Financial Action Task Force (FATF) just released a Targeted Report on Stablecoins and Unhosted Wallets, highlighting a significant shift in the virtual asset landscape. As stablecoins move to the core of the global financial system, their misuse by illicit actors is also rising. Here are some of the key points from this report: 📌 Dominance in Illicit Finance Stablecoins have surpassed Bitcoin as the most popular virtual asset used in illicit transactions, accounting for 84% of the USD 154 bn illicit virtual asset transaction volume in 2025, according to Chainalysis. Their price stability, high liquidity, and interoperability make them highly attractive for money laundering, terrorist financing, and proliferation financing. ⚠️ Rapid Market Integration As of mid-2025, the stablecoin market capitalization exceeded USD 300 bn, with over 250 stablecoins in circulation. Stablecoins now represent 30% of all on-chain virtual asset transaction volume. 🔍 The Unhosted Vulnerability Peer-to-Peer (P2P) transactions via unhosted wallets represent a major loophole because they occur without the involvement of AML/CFT-obliged intermediaries. This allows threat actors to obfuscate the origin of funds and evade sanctions. 🛠️ Innovative Mitigation Tools The report highlights "good practices" for both jurisdictions and the private sector, such as: ✦ Programmable Controls: Embedding freeze, burn, and deny listing functions directly into smart contracts to stop illicit transactions in secondary markets. ✦ Allow-listing: Permitting only pre-approved, verified addresses to hold or transfer specific stablecoins. ✦ Advanced Analytics: Leveraging AI and blockchain forensics to monitor suspicious cross-chain activity. Recommended Actions: ➟ For Jurisdictions: Fully implement FATF Recommendation 15 to ensure that stablecoin issuers and intermediaries are licensed and supervised. ➟ For the Private Sector: Issuers should maintain 24/7 contact points for law enforcement and be able to freeze stablecoins expeditiously. 💡 What stood out to you in this report? #TCAE #Stablecoins #CryptoCompliance #DigitalAsset #FATF

"The rapid evolution of #cryptoassets, including #stablecoins, and retail central bank digital currency (#CBDC) has led to changes in #regulatory_frameworks to incorporate them. The expansion of options beyond bank deposits and cash calls for a holistic analysis of the effectiveness of anti-money laundering (#AML) and combating the financing of terrorism (#CFT) regimes across different payment instruments. … Several conceivable #regulatory_options can apply consistently across payment instruments #without_intermediaries. First, for all instruments in this group, AML/CFT frameworks can leverage touch points, or #entry_exit_points, where illicit funds interact with those intermediaries in the first group of instruments, while acknowledging that this is a partial solution as it only allows for the monitoring of incoming and outgoing transactions.   Examples of such touch points include #cash_withdrawals or #deposits with #commercial_banks and the conversion between self-hosted #stablecoins and commercial bank deposits or e-money. …   A stronger emphasis could be placed on the responsibilities of and enforcement by the #issuers_of_payment_instruments. As issuers of banknotes, central banks have a role to play, as illustrated by the decision of the Eurosystem to discontinue the issuance of EUR 500 notes in 2019 to address AML/CFT concerns. Similarly, #stablecoin_issuers have complied with requests from authorities to freeze the coins in self-hosted wallets associated with illicit activities."   — From: Andrea Minto, Anneke Kosse, Takeshi Shirakami and Peter Wierts, From Cash to Crypto: Towards a Consistent Regulatory Approach to Illicit Payments, Bank for International Settlements [#BIS], BIS Papers No. 166, March 3, 2026   The full paper is here: https://lnkd.in/geZds7wy

The latest landmark guidance from the U.S. Securities and Exchange Commission signals a transition from regulatory ambiguity to structured oversight, accelerating institutional participation in #crypto markets. As #digital #assets become more clearly classified, capital allocation from banks, asset managers, and sovereign funds is likely to increase, reinforcing crypto as a legitimate asset class. The SEC's new interpretation classifies crypto tokens into five categories: digital #commodities, digital #collectibles, digital #tools, #stablecoins, and digital #securities, with the agency specifying that federal securities laws apply only to digital securities. The SEC also said that a "non-security" crypto asset could become subject to securities laws if an issuer offers it by promoting investment in a common enterprise from which a purchaser could expect to profit. The SEC’s crypto guidance accelerates convergence between traditional exchanges and digital asset markets, driving new listings, tokenized securities, and hybrid trading platforms. This shift boosts institutional participation, liquidity, and cross-border capital flows while intensifying competition among exchanges worldwide. Globally, this reduces regulatory arbitrage and encourages cross-border harmonization, a priority already highlighted by international bodies. Several jurisdictions have already implemented comprehensive crypto frameworks. The European Union’s Markets in Crypto-Assets Regulation (MiCA), fully applicable since 2024, establishes licensing, disclosure, and investor protection rules across member states. The #UK and over 40 countries are implementing OECD - OCDE-led crypto tax reporting #standards, while #Singapore, #Japan, #HongKong, and the #UAE have introduced licensing and stablecoin regulations. This indicates a broader global convergence toward standardized crypto #governance, with the U.S. guidance now aligning more closely with an emerging #international regulatory architecture rather than leading it independently. Clear U.S. crypto regulation integrates digital assets more deeply into the global economy, enabling tokenized #trade #finance, faster cross-border settlements, and reduced friction in global #commerce—positively influencing global #GDP growth and #trade velocity. As digital assets increasingly intersect with tariffs, customs, and #supplychain financing, governments may explore programmable tariffs and blockchain-based trade #compliance. However, the expansion of crypto infrastructure introduces systemic #cyber #risk. As #quantum computing advances, the cryptographic standards underpinning cryptocurrencies and digital finance are vulnerable. Governments must accelerate the adoption of #quantum-resilient (post-quantum) cryptography to safeguard financial stability, preserve #trust, and maintain competitiveness in a rapidly digitizing #global #economy. #strategy #technology #digital #finance #fintech #bnaking #investments #stockmarket #wealth

𝗧𝗵𝗲 𝗦𝗘𝗖'𝘀 𝗡𝗲𝘄 𝗧𝗼𝗸𝗲𝗻 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸: 𝗪𝗵𝗮𝘁 𝗔𝗰𝘁𝘂𝗮𝗹𝗹𝘆 𝗖𝗵𝗮𝗻𝗴𝗲𝘀 SEC Chairman Paul Atkins used the #𝗣𝗵𝗶𝗹𝗮𝗱𝗲𝗹𝗽𝗵𝗶𝗮𝗙𝗲𝗱𝗙𝗶𝗻𝘁𝗲𝗰𝗵𝗖𝗼𝗻𝗳𝗲𝗿𝗲𝗻𝗰𝗲 to outline the next phase of Project Crypto, which introduces a structured taxonomy for classifying digital assets under existing U.S. securities law. 𝗧𝗵𝗲 𝗮𝗶𝗺 𝗶𝘀 𝗰𝗼𝗻𝘀𝗶𝘀𝘁𝗲𝗻𝗰𝘆: 𝗮 𝗽𝗿𝗲𝗱𝗶𝗰𝘁𝗮𝗯𝗹𝗲 𝗺𝗲𝘁𝗵𝗼𝗱 𝗳𝗼𝗿 𝗱𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗶𝗻𝗴 𝘄𝗵𝗲𝗻 𝗮 𝘁𝗼𝗸𝗲𝗻 𝗶𝘀 𝗮 𝘀𝗲𝗰𝘂𝗿𝗶𝘁𝘆, 𝘄𝗵𝗲𝗻 𝗶𝘁 𝗶𝘀 𝗻𝗼𝘁, 𝗮𝗻𝗱 𝗵𝗼𝘄 𝘁𝗵𝗮𝘁 𝘀𝘁𝗮𝘁𝘂𝘀 𝘀𝗵𝗼𝘂𝗹𝗱 𝗲𝘃𝗼𝗹𝘃𝗲. The framework is built on two principles. 𝟭. 𝗧𝗼𝗸𝗲𝗻𝗶𝘀𝗲𝗱 𝘁𝗿𝗮𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗮𝘀𝘀𝗲𝘁𝘀 𝗸𝗲𝗲𝗽 𝘁𝗵𝗲𝗶𝗿 𝗹𝗲𝗴𝗮𝗹 𝗰𝗵𝗮𝗿𝗮𝗰𝘁𝗲𝗿. A bond recorded on a blockchain remains a bond. A tokenised equity interest remains equity. Tokenisation changes the format of record-keeping, not the regulatory status of the instrument. 𝟮. 𝗟𝗮𝗯𝗲𝗹𝘀 𝘀𝘂𝗰𝗵 𝗮𝘀 "𝘁𝗼𝗸𝗲𝗻" 𝗼𝗿 "𝗡𝗙𝗧" 𝗱𝗼 𝗻𝗼𝘁 𝗶𝗻𝗳𝗹𝘂𝗲𝗻𝗰𝗲 𝗰𝗹𝗮𝘀𝘀𝗶𝗳𝗶𝗰𝗮𝘁𝗶𝗼𝗻. If an asset is sold with expectations of profit based on the efforts of a central actor, it can still fall under the Howey Test. The name or representation does not create an exemption. 𝗔𝘁𝗸𝗶𝗻𝘀 𝗮𝗹𝘀𝗼 𝗮𝗱𝗱𝗿𝗲𝘀𝘀𝗲𝗱 𝘁𝗲𝗺𝗽𝗼𝗿𝗮𝗹 𝗰𝗹𝗮𝘀𝘀𝗶𝗳𝗶𝗰𝗮𝘁𝗶𝗼𝗻. A token can begin life as a security, particularly where initial sales fund future development, and later become a non-security once the underlying network reaches sufficient decentralisation. 𝗜𝗺𝗽𝗮𝗰𝘁: 𝘛𝘩𝘪𝘴 𝘳𝘦𝘧𝘭𝘦𝘤𝘵𝘴 𝘢 𝘮𝘰𝘳𝘦 𝘧𝘭𝘦𝘹𝘪𝘣𝘭𝘦 𝘪𝘯𝘵𝘦𝘳𝘱𝘳𝘦𝘵𝘢𝘵𝘪𝘰𝘯 𝘰𝘧 𝘏𝘰𝘸𝘦𝘺, 𝘳𝘦𝘤𝘰𝘨𝘯𝘪𝘴𝘪𝘯𝘨 𝘵𝘩𝘢𝘵 𝘵𝘩𝘦 𝘦𝘤𝘰𝘯𝘰𝘮𝘪𝘤 𝘢𝘳𝘳𝘢𝘯𝘨𝘦𝘮𝘦𝘯𝘵 𝘢𝘳𝘰𝘶𝘯𝘥 𝘢 𝘵𝘰𝘬𝘦𝘯 𝘤𝘢𝘯 𝘤𝘩𝘢𝘯𝘨𝘦 𝘰𝘷𝘦𝘳 𝘵𝘪𝘮𝘦. 𝗔 𝗻𝗼𝘁𝗮𝗯𝗹𝗲 𝗲𝗹𝗲𝗺𝗲𝗻𝘁 𝗶𝘀 𝘁𝗵𝗲 𝘁𝗿𝗮𝗱𝗶𝗻𝗴 𝘃𝗲𝗻𝘂𝗲 𝗾𝘂𝗲𝘀𝘁𝗶𝗼𝗻. The SEC signalled support for allowing non-security tokens to trade on platforms supervised by the Commodity Futures Trading Commission or state financial regulators, rather than restricting all activity to SEC-registered exchanges. 𝗜𝗺𝗽𝗮𝗰𝘁: 𝘛𝘩𝘪𝘴 𝘤𝘭𝘢𝘳𝘪𝘧𝘪𝘦𝘴 𝘢 𝘥𝘶𝘢𝘭-𝘳𝘦𝘨𝘪𝘮𝘦 𝘴𝘵𝘳𝘶𝘤𝘵𝘶𝘳𝘦 𝘪𝘯 𝘸𝘩𝘪𝘤𝘩 𝘢𝘴𝘴𝘦𝘵 𝘤𝘭𝘢𝘴𝘴𝘪𝘧𝘪𝘤𝘢𝘵𝘪𝘰𝘯 𝘥𝘦𝘵𝘦𝘳𝘮𝘪𝘯𝘦𝘴 𝘵𝘩𝘦 𝘢𝘱𝘱𝘳𝘰𝘱𝘳𝘪𝘢𝘵𝘦 𝘮𝘢𝘳𝘬𝘦𝘵 𝘷𝘦𝘯𝘶𝘦. By clarifying that legal character persists through tokenisation, and by defining how classification should adapt as networks evolve, the SEC is creating a more consistent architecture for issuers, intermediaries, and trading platforms. #SEC #Tokenisation #CryptoRegulation #Tranched

Digital assets are here - ready or not. FinCEN and OFAC have jointly proposed a new rule that would treat permitted payment stablecoin issuers (PPSIs) as financial institutions and subject them to requirements meant to prevent money laundering and impose obligations specified in the GENIUS Act. ❓ What is a stablecoin? Stablecoins are digital assets that are backed by reliable assets such as a national currency or a commodity. ❓ What is the GENIUS Act? The Guiding and Establishing National Innovation for US Stablecoins Act is a law that provides a regulatory framework for stablecoins, and among other things, requires stablecoins to be backed one-for-one by US dollars or other low-risk assets. ❓ What were some of the criticisms of the new law? One big one was that it allows big tech companies to engage in financial activities like banks, but without being subject to the tougher regulations required of banks and financial institutions. ❓ So what does the proposed joint rule require of PPSIs? They should: 1 - Establish and maintain an AML/CFT program that largely mirrors the AML/CFT program obligations FinCEN recently proposed for the 11 types of existing financial institutions 2 - File suspicious activity reports (SARs) 3 - Maintain the technical capabilities, policies, and procedures to block, freeze, and reject specific or impermissible transactions that violate federal or state laws, rules, or regulations 4 - Maintain the technical capabilities to comply, and do comply, with the terms of any lawful order 5 - Maintain an effective sanctions compliance program In addition, the proposal would require PPSIs to collect and retain records for funds transfers and transmittals of funds in amounts of $3,000 or more and comply with the Travel Rule, requiring them to transmit information on certain funds transfers to financial institutions participating in said transaction. A PPSI would be required, upon receipt of a request from FinCEN, to comply under section 314(a) of the USA PATRIOT Act and can participate in voluntary information exchanges through the 314(b) information-sharing program. For sanctions compliance, PPSIs would be required to adopt OFAC's framework. Technically, there is no legal requirement for US businesses to have a sanctions compliance program, but because OFAC follows a strict liability rule when it comes to violations, it's absolutely necessary. For PPSIs, however, this looks to be an actual requirement under this proposal, and they will be required to comply with standard recordkeeping and reporting requirements as well. I'd say if you're planning to transact with a PPSI, you should definitely look into what their compliance programs look like. https://lnkd.in/e2SyZFKE

The SEC just did something subtle… and massive for our industry. They clarified that crypto assets are not special. If it walks like a security and talks like a security… it’s a security. That may sound obvious. But the implications are huge: 1. The “utility token” gray area just got a lot smaller - Issuers can’t rely on semantics anymore. If investors expect profit → securities laws apply. Period. 2. Regulation Crowdfunding just became more important - If you’re raising from the crowd and your token has investment characteristics, there are really only a few compliant paths: RegCF, RegA, RegD. This pushes more issuers into structured, compliant offerings instead of experimental workarounds. (Gee I've been talking about this ....) 3. Secondary trading is now the real bottleneck - This is the part most people are missing. The SEC made it clear that platforms facilitating trading need to operate within existing frameworks (broker-dealers, ATSs, etc.). And critically… you need current, public information for securities to trade. That’s not a blockchain problem. That’s a disclosure problem. (Hello GUARDD.com) 4. Blue Sky laws didn’t disappear - Even with tokenization, state-level requirements still matter—especially once secondary trading begins. Here’s the bottom line: We’re not heading toward a new crypto-specific regulatory system. We’re heading toward a world where: - All investable assets (including tokens) are treated as securities - Capital formation happens through exemptions like RegCF - Secondary trading depends on standardized, ongoing disclosures In other words… 👉 The future of tokenized securities won’t be defined by technology. 👉 It will be defined by compliance infrastructure. And that’s where the real opportunity is. Curious how others are thinking about secondary trading + disclosures in this new environment.

Crypto markets will not mature by rejecting securities regulation, but by understanding why it evolved. The prevailing assumption is that a century of securities law represents unnecessary bureaucracy layered onto otherwise efficient capital markets. In this view, decentralization removes the need for disclosure mandates, capital requirements, and supervisory oversight. That assumption fails when capital scales. Securities regulation did not emerge to slow markets. It emerged to address information asymmetry, insider advantage, fraud, and systemic leverage that repeatedly destabilized investors and institutions. Disclosure rules, reporting standards, and capital requirements were responses to structural failures, not theoretical preferences. The deeper mechanics are instructive. Public disclosure reduced informational imbalance between issuers and investors. Clearing and settlement rules reduced counterparty risk. Capital standards limited excessive leverage. Enforcement mechanisms created consequences for misrepresentation. These mechanisms were not perfect, but they institutionalized accountability. The second-order effect of ignoring these lessons is predictable. Markets that prioritize speed and innovation without embedded transparency and enforceable standards attract speculative capital quickly, but struggle to retain institutional capital when volatility exposes structural weaknesses. For builders and policymakers in crypto markets, the question is not whether to replicate legacy frameworks wholesale. It is which elements of historical regulation addressed real systemic risk, and how to embed their discipline without reproducing unnecessary procedural excess.