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Home | BakerHostetler

HIPAA at 21 Years of Compliance: Why the Security Rule May Be Entering a More Prescriptive Era

Insurance Class Action Report, 2026 Q1

Data Counsel

State Privacy in Brief, Q1 2026

DOL Proposes New Joint Employment Test for FLSA and FMLA

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Payments and Digital Assets Companies Announce Stablecoin Initiatives

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Major Banks Launch Initiatives to Promote Access to Digital Assets

CFTC Approves Spot Crypto Trading on DCMs, Crypto as FCM Margin Collateral

OCC Confirms Bank’s Authority for Riskless Principal Crypto Transactions

Trading Firm’s Letter to SEC Sparks Debate over DeFi

Paxful Faces $4M Criminal Fine, $3.5M Civil Penalty for AML Failures

Terraform Founder Do Kwon Sentenced to 15 Years

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Payments and Digital Assets Companies Announce Stablecoin Initiatives

By <a href="https://www.bakerlaw.com/professionals/jonathan-cardenas/">Jonathan Cardenas</a>

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A leading global payments network and a stablecoin infrastructure platform recently announced a partnership focused on cross-border stablecoin-based payment settlement and digital asset treasury management. According to a press release, the integration will enable the payments network to introduce new stablecoin-enabled features including programmable money, receipt of stablecoin payments and access to liquidity pools across global entities.  

In more stablecoin news, a Singapore-based stablecoin infrastructure provider announced the launch of its White-Label Stablecoin Solution, which reportedly enables businesses, payment providers and financial institutions to launch their own enterprise-branded stablecoins using the provider’s stablecoin infrastructure technology stack. According to a press release, the solution consists of four components, which include client-controlled minting and burning of smart contracts, custody and wallet infrastructure, a know-your-transaction system for regulatory compliance, and a user front end with application programming interfaces.

In another development, a Bermuda-based stablecoin infrastructure company recently announced the launch of its new stablecoin orchestration platform. According to a press release, the stablecoin orchestration platform will enable users to “receive, buy, sell, convert, send, and store” both stablecoins and fiat currencies utilizing on/off ramps to bank accounts worldwide, among other related features. In parallel, the company is reportedly also launching its own Layer-1 blockchain network for stablecoin payments and real-world asset settlement.

Finally, Tempo, a stablecoin-focused blockchain network, recently announced the launch of its public testnet. Among other features, the Tempo testnet reportedly provides dedicated avenues for payments that are reserved at the protocol level, the ability for transaction fees to be paid directly in stablecoins, a built-in decentralized exchange designed for stablecoins and tokenized deposits, and transaction record metadata for audit purposes.

For more information, please refer to the following links:

<a href="https://www.prnewswire.com/news-releases/moneygram-and-fireblocks-partner-to-supercharge-global-treasury-management-using-stablecoins-and-real-time-payments-302632684.html">[] and [] Partner to Supercharge Global Treasury Management Using Stablecoins and Real-Time Payments</a>

<a href="https://www.prnewswire.com/news-releases/wspn-launches-white-label-stablecoin-infrastructure-to-enable-enterprises-to-issue-branded-stablecoins-302633894.html">[] Launches White-Label Stablecoin Infrastructure to Enable Enterprises to Issue Branded Stablecoins</a>

<a href="https://www.businesswire.com/news/home/20251204916687/en/1Money-Launches-1Money.com-The-First-Global-Stablecoin-Orchestration-Platform-With-Zero-Platform-Fees">[] Launches []: The First Global Stablecoin Orchestration Platform With Zero Platform Fees</a>

<a href="https://tempo.xyz/blog/testnet">Tempo’s testnet is live</a>

Major Banks Launch Initiatives to Promote Access to Digital Assets

By <a href="https://www.bakerlaw.com/professionals/ariana-dindiyal/">Ariana Dindiyal</a>

In a press release this week, a U.S. bank announced that it has become the first major U.S. bank to launch direct bitcoin access to its clients, allowing them to buy, hold and sell bitcoin directly through its digital banking platform. According to the press release, the new offering is powered by a major U.S. exchange’s crypto-as-a-service infrastructure and seeks to offer “secure and well-designed options that fit within the broader context” of finance while maintaining a secure and familiar banking environment.

In related news, a bank affiliated with a major Tokyo-based electronics company recently announced that it has partnered with Bastion, a stablecoin infrastructure provider, to provide stablecoin services. According to the press release, “Bastion will manage the issuance of stablecoins backed by the U.S. dollar, reserve management, and custody, acting as the designated service provider” for the bank as it enters the stablecoin market.

In a third press release, N3XT announced that it has launched “a new bank built on blockchain technology to leverage break-through innovation in finance … enabling clients to make instant, programmable business-to-business payments in U.S. dollars any hour of the day.” According to the press release, the N3XT platform is built on a private, permissioned blockchain “that can settle transactions immediately without relying on outside financial institutions to clear payments.” The press release further notes that the N3XT platform “enables programmability, auditability, and speed while maintaining control and regulatory compliance … allowing crypto-native businesses to bank in U.S. dollars and access the traditional finance system.”

<a href="https://www.prnewswire.com/news-releases/pnc-first-major-bank-to-launch-direct-bitcoin-access-for-clients-powered-by-coinbases-crypto-as-a-service-infrastructure-302636241.html">[] First Major Bank to Launch Direct Bitcoin Access for Clients, Powered by Coinbase’s Crypto-as-a-Service Infrastructure</a>

<a href="https://www.globenewswire.com/news-release/2025/12/01/3197011/0/en/Bastion-Named-Sole-Issuance-Provider-for-Sony-Bank-Stablecoin-Initiative.html">Bastion Named Sole Issuance Provider for [] Bank Stablecoin Initiative</a>

<a href="https://www.businesswire.com/news/home/20251204526572/en/N3XT-Launches-First-Fully-Blockchain-Powered-Bank-for-Instant-Programmable-B2B-Payments">N3XT Launches First Fully Blockchain-Powered Bank for Instant, Programmable B2B Payments</a>

CFTC Approves Spot Crypto Trading on DCMs, Crypto as FCM Margin Collateral

By <a href="https://www.bakerlaw.com/RobertAMusiala">Robert A. Musiala Jr.</a><a href="https://www.bakerlaw.com/VeronicaReynolds"></a>

Bitnomial Inc., a U.S. derivatives exchange, recently announced “the upcoming launch of the first-ever leveraged retail spot crypto exchange operating under CFTC regulation through its Designated Contract Market (DCM), Bitnomial Exchange, LLC, and Derivatives Clearing Organization (DCO), Bitnomial Clearinghouse, LLC.” According to a press release, because spot crypto exchange transactions are offered through a DCM, customers benefit by being able to access net settlement and portfolio margining across spot, perpetuals, futures and options all on one exchange, and institutions and brokers benefit by having access to a CFTC-regulated spot exchange rather than state money transmitter oversight. The CFTC issued its own press release on the development, noting that “listed spot cryptocurrency products will begin trading for the first time in U.S. federally regulated markets on CFTC registered futures exchanges.”

The CFTC also recently published a press release announcing (1) <a href="https://www.cftc.gov/csl/25-39/download" target="_blank" rel="noreferrer noopener">guidance on tokenized collateral</a>; (2) the launch of a <a href="https://www.cftc.gov/csl/25-40/download" target="_blank" rel="noreferrer noopener">digital assets pilot program</a> for certain digital assets, including BTC, ETH and USDC, to be used as collateral in derivatives markets; and (3) <a href="https://www.cftc.gov/csl/25-41/download" target="_blank" rel="noreferrer noopener">withdrawal of outdated requirements</a> given the enactment of the GENIUS Act. According to the press release, the new guidance on tokenized collateral applies to tokenized real-world assets, including U.S. Treasury securities and money market funds, and it addresses topics related to eligible tokenized assets; legal enforceability; segregation, custody and control arrangements; haircuts and valuation; and operational risks.

With respect to the pilot program, the press release notes that the program sets up “a framework for registered FCMs [futures commission merchants] to accept and take into account the value of non-securities digital asset customer margin collateral and deposit payment stablecoins as residual interest.” The pilot program is set forth in a no-action letter. The program limits the digital assets that an FCM can accept as margin collateral to bitcoin, ether and USDC. FCMs relying on the no-action letter are also required during an initial three-month period to provide weekly reporting of the total amount of digital assets held in customer accounts, listing each asset type separately for each of the three customer account classes, and to promptly notify CFTC staff of any significant issue affecting the use of digital assets as customer margin collateral.

<a href="https://www.prnewswire.com/news-releases/bitnomial-announces-launch-of-leveraged-retail-spot-crypto-exchange-302633203.html">Bitnomial Announces Launch of Leveraged Retail Spot Crypto Exchange</a>

<a href="https://www.cftc.gov/PressRoom/PressReleases/9145-25">Acting Chairman Pham Announces First-Ever Listed Spot Crypto Trading on U.S. Regulated Exchanges</a>

<a href="https://www.cftc.gov/PressRoom/PressReleases/9146-25">Acting Chairman Pham Announces Launch of Digital Assets Pilot Program for Tokenized Collateral in Derivatives Markets</a>

<a href="https://www.cftc.gov/csl/25-41/download">Withdrawal of CFTC Staff Advisory 20-34 on Accepting Virtual Currencies from Customers into Segregation</a>

OCC Confirms Bank’s Authority for Riskless Principal Crypto Transactions

By<a href="https://www.bakerlaw.com/professionals/amos-kim/" target="_blank" rel="noreferrer noopener"> Amos Kim</a>

In a recent press release, the U.S. Office of the Comptroller of the Currency (OCC) announced that it has issued Interpretive Letter 1188, which confirms that national banks and federal savings associations may engage in “riskless principal transactions” involving crypto assets. According to the press release, the letter clarifies that these activities are permissible as part of the banking business. The press release explains that riskless principal transactions are transactions that “involve a bank acting as principal in a crypto-asset transaction with one customer while simultaneously entering into an offsetting transaction with another customer.” In such transactions, “[t]he bank serves as an intermediary and does not hold the crypto-assets in inventory, instead acting in a capacity equivalent to that of a broker acting as agent.”

As explained by Interpretive Letter 1188, in a riskless principal transaction, an intermediary purchases an asset from one counterparty for immediate resale to a second counterparty, the ultimate purchaser of the asset. The intermediary’s purchase of the asset from the initial counterparty is conditioned on an offsetting order from the second counterparty to purchase the same asset from the intermediary. Execution of the offsetting purchase and execution of the sale effectively occur simultaneously.

According to Interpretive Letter 1188, while national banks were already authorized to conduct riskless principal transactions for crypto assets that are securities, this authority extends to crypto assets that are not securities. Interpretive Letter 1188 notes, “Buying and selling crypto-assets for custody customers as riskless principal at a custody customer’s direction is the economic equivalent to buying and selling crypto-assets as agent for custody customers and is thus a logical outgrowth of a recognized banking activity.” The OCC emphasized that banks must conduct these activities with appropriate policies to manage risks such as settlement default.

<a href="https://www.occ.treas.gov/news-issuances/news-releases/2025/nr-occ-2025-121.html">OCC Confirms Bank Authority to Engage in Riskless Principal Crypto-Asset Transactions</a>

<a href="https://www.occ.treas.gov/topics/charters-and-licensing/interpretations-and-actions/2025/int1188.pdf">OCC Interpretive Letter #1188: National Bank Engagement in Riskless Principal Transactions in Crypto-Assets</a>

Trading Firm’s Letter to SEC Sparks Debate over DeFi

By <a href="https://www.bakerlaw.com/professionals/john-e-robertson/">John E. Robertson</a>

On Dec. 2, a major U.S. market-making firm sent a letter to the U.S. Securities and Exchange Commission (SEC) arguing that decentralized finance projects (DeFi) that allow the trading of tokenized securities should be subject to the same regulations as traditional exchanges and broker-dealers. The letter argues many DeFi trading protocols fit the statutory definition of “exchange” by establishing the trading protocol used by investors on the platform while also providing the means for the buyers and sellers to be brought together. The letter also argues that many DeFi protocols include brokers, and it lists several DeFi market actors the firm believes fit the definition of a broker, including DeFi trading apps, wallet providers, automated market makers, developers and token issuers.

The letter reportedly takes the position that refusing to regulate DeFi protocols in the same manner as traditional exchanges would “suggest that the technology used matters more than the services provided.” According to the letter, traditional regulations should be applied to DeFi protocols to protect consumers.

Crypto advocates have reportedly responded to the letter with criticism. These advocates have reportedly urged the SEC to grant exemptive relief to DeFi protocols, stating that applying these regulations to DeFi would stifle innovation and undermine U.S. competitiveness in digital assets. The advocates also contest the letter’s position that DeFi trading protocols and platforms meet the statutory definition of an exchange, and they refute the position that there are intermediaries in the DeFi trading process.

<a href="https://www.sec.gov/files/citadel-securities-120225.pdf">[] Securities: Re: Tokenized U.S. Equity Securities &amp; DeFi Trading Protocols</a>

<a href="https://www.law360.com/fintech/articles/2418508?nl_pk=269c598f-8e37-49e3-bf43-b88e05d4215b&amp;ab_exp_id=nl_subject&amp;ab_exp_var=b&amp;utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=fintech&amp;utm_content=2025-12-05&amp;read_main=1&amp;nlsidx=0&amp;nlaidx=0">[] Securities Sparks Crypto Clash Over DeFi Exemptions</a>

Paxful Faces $4M Criminal Fine, $3.5M Civil Penalty for AML Failures

By <a href="https://www.bakerlaw.com/professionals/om-m-kakani/">Om M. Kakani</a>

On Dec. 9, Paxful Holdings, parent of the now-defunct Paxful cryptocurrency exchange, agreed to pay a $4 million criminal fine after U.S. federal prosecutors alleged it conspired to operate an unlicensed money transmitting business, failed to maintain an effective anti-money-laundering (AML) program and violated the Travel Act. Separately, the U.S. Financial Crimes Enforcement Network (FinCEN) imposed a $3.5 million civil penalty for willful violations of the Bank Secrecy Act, including failure to register as a money services business and to file suspicious activity reports. According to the plea agreement and FinCEN’s consent order, Paxful’s AML compliance failures included the following:

Paxful facilitated transactions tied to prostitution, child exploitation, ransomware attacks, darknet markets, terrorist financing and other illicit activities.

The platform marketed itself as requiring no know-your-customer (KYC) information and allowed users to buy and trade without identification.

Paxful failed to register as a money services business, implement an effective AML program and file suspicious activity reports.

Compliance measures were delayed – no chief compliance officer was designated until late 2018, and AML/KYC training began only in mid-2019.

On July 8, 2024, Paxful’s co-founder and former chief technology officer, Artur Schaback, pleaded guilty to conspiracy to fail to maintain an effective AML program in relation to the same scheme.

For more information, please refer to the following link:

<a href="https://www.fincen.gov/news/news-releases/fincen-assesses-35-million-penalty-against-paxful-facilitating-suspicious">FinCEN Assesses $3.5 Million Penalty Against Paxful for Facilitating Suspicious Activity Involving Illicit Actors</a>

By <a href="https://www.bakerlaw.com/professionals/om-m-kakani/">Om M. Kakani</a>

On Dec. 11, a Manhattan federal court handed down a 15-year prison sentence and forfeiture of $19 million to Do Kwon, founder of Terraform Labs. U.S. District Judge Paul A. Engelmayer described Kwon’s actions as “a fraud on an epic, generational scale,” noting that his conduct caused “real people to lose $40 billion in real money.”

This criminal outcome sits alongside a civil enforcement resolution with the SEC – a judgment totaling roughly $4.5 billion, including more than $200 million in personal liability for Kwon and wind‑down measures for Terraform Labs. Engelmayer’s sentence was above the prosecution’s request for 12 years – the maximum the government could seek under the plea agreement.

Kwon’s key misrepresentations included:

Stablecoin Peg Fraud: Kwon falsely claimed TerraUSD’s $1 peg was maintained by algorithmic design; in reality, it required undisclosed intervention by a trading firm.

LFG Governance Failure: The Luna Foundation Guard (LFG), marketed as independent, was secretly controlled by Kwon, who misappropriated hundreds of millions of dollars in reserves.

Mirror Protocol Manipulation: Terraform inflated adoption metrics and manipulated synthetic asset prices using bots funded by Genesis Stablecoins.

Chai Integration Deception: Kwon misrepresented Terra’s real-world utility by faking blockchain transaction data for the Korean payment app Chai.

Genesis Stablecoins Misuse: Pre-minted tokens were used for fraudulent activities, including fake transactions and price manipulation.

<a href="https://www.justice.gov/usao-sdny/pr/crypto-enabled-fraudster-sentenced-orchestrating-40-billion-fraud">Crypto-Enabled Fraudster Sentenced For Orchestrating $40 Billion Fraud</a>

<a href="https://www.sec.gov/newsroom/press-releases/2024-73">Terraform and Kwon to Pay $4.5 Billion Following Fraud Verdict</a>

Blockchain Monitor

Blockchain Monitor - Planet earth in outer space with network connection and sunlight.

Weekly Blockchain Monitor – December 15, 2025

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