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 Issues Disclosure Guidance for Crypto ETFs
On July 1, the Securities and Exchange Commission (SEC) Division of Corporation Finance issued guidance outlining disclosure expectations for crypto asset exchange-traded products, including both spot and derivative-based exchange-traded funds (ETFs). The guidance identifies key areas where issuers are expected to provide comprehensive disclosures in registration statements. Such areas include valuation methodologies, net asset valuation calculation, custody practices, and redemption processes. Additionally, the guidance suggests that issuers address risks specific to crypto markets and disclose any conflicts of interest involving sponsors or service providers. Further, the guidance covers disclosure requirements related to index methodologies, token characteristics, governance structures, and financial reporting. While not exhaustive, the guidance reflects the staff’s increased emphasis on transparency, and such guidance may also contribute to a more efficient review process for future ETF filings. The Division’s statement can be read here.
Financial Action Task Force Urges New Crypto Regulations
On June 26, the Financial Action Task Force (FATF) released its annual report recommending enhanced regulatory measures to align the cryptocurrency sector with anti-money-laundering and counter-terrorist financing (CTF) standards. The report emphasized the potential risks associated with stablecoins and decentralized finance (DeFi) platforms in facilitating illicit activities, citing concerns that North Korea may use stablecoins to finance its weapons program. To address these risks, the FATF advises jurisdictions to implement licensing and registration requirements for virtual asset service providers. If jurisdictions fail to comply with FATF standards, they may be placed on a “gray list,” subjecting them to increased international scrutiny. Such a designation can carry significant economic and reputational consequences, providing a strong incentive for countries to adhere to the FATF’s regulatory framework. The entire report can be read here.
Connecticut Bans State Crypto Involvement as Other States Embrace Bitcoin Reserves
On June 30, Connecticut Gov. Ned Lamont signed House Bill 7082 (HB 7082) into law, which prohibits state agencies from investing in or accepting crypto and imposes strict disclosure requirements on crypto-related businesses operating in the state. Further, HB 7082 mandates that companies highlight risks such as fraud and the irreversible nature of virtual currency transactions for consumer protection purposes. Passed unanimously by the Connecticut General Assembly, HB 7082 marks one of the most comprehensive state-level bans on digital asset adoption. In contrast, states like Texas, Arizona, and New Hampshire are moving toward incorporating Bitcoin into public reserves, underscoring a growing national divide over the role of digital assets in government finance. The full text of HB 7082 may be found here.
Arizona Governor Vetoes Crypto Seizure Reserve Bill
On July 1, Arizona Gov. Katie Hobbs vetoed House Bill 2324, which proposed the creation of a state-managed Bitcoin and digital assets reserve fund financed by proceeds from seized crypto. The legislation, which narrowly passed both chambers of the state legislature, would have directed the first $300,000 in seized digital assets to the attorney general’s (AG) office, with any additional proceeds to be allocated among the AG’s office, the state general fund, and the newly established reserve fund. In her veto letter, Gov. Hobbs expressed concern that the bill could reduce incentives for law enforcement agencies to participate in digital asset seizures by redirecting proceeds away from local agencies. This marks the third veto by Hobbs this legislative session concerning proposals related to crypto reserve funds. The text of the bill can be read here, and the veto letter can be read here.
SEC Approves Grayscale’s Digital Large Cap Fund Conversion to Crypto ETF
On July 1, the SEC approved Grayscale Investment LLC’s proposal to convert its Digital Large Cap Fund (GDLC) into a spot ETF and then stayed the order the next day. The ETF, which was to trade on NYSE Arca, tracks a diversified portfolio of five major cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Solana (SOL), and Cardano (ADA). The ETF structure would allow for continuous trading and on-exchange creation and redemption, potentially unlocking greater institutional capital flows and offering investors simplified access to diversified crypto exposure. The SEC order granting approval may be found here, and the SEC order staying such approval can be found here.
Circle Internet Group Inc. Applies for National Trust Bank Charter
On June 30, Circle Internet Group Inc. (NYSE: CRCL) announced it has formally submitted an application to the Office of the Comptroller of the Currency (OCC) for a national trust bank charter. The proposed entity, First National Digital Currency Bank N.A., would operate under federal supervision, allowing Circle to directly manage USDC reserves and offer digital asset custody services to institutional clients. The bank would not be authorized to accept cash deposits or engage in lending activities directly. If granted, Circle would join Anchorage Digital Bank N.A. as one of the few crypto-native firms holding a national trust charter. CEO and co-founder Jeremy Allaire characterized the application as a “significant milestone in [the company’s] goal to build an internet financial system that is transparent, efficient and accessible.” The application is subject to a 30-day comment period, with regulatory decisions typically made within 120 days. Notably, following Circle’s application for a national trust bank charter, Ripple also submitted an application for a national trust bank charter. Circle’s press release on the matter can be read here and Ripple’s CEO’s X post on the matter can be found here.
