This week’s crypto brief from Lowenstein Sandler LLP highlights key developments including the Federal Reserve’s withdrawal of banking guidelines on crypto, the SEC dropping its investigation into PayPal’s stablecoin, and Kraken’s launch of a crypto trading service for banks. Mastercard is enabling stablecoin payments, the UK is drafting new regulatory rules, and Arizona is advancing its crypto reserve fund legislation.
Lowenstein Sandler LLP is back with its latest crypto brief, dedicated to advising digital asset projects, trading firms, and exchanges on everything from regulatory nuances to commercial disputes. This week’s update shines a spotlight on several key shifts in the landscape of digital assets and regulations that market participants should keep a keen eye on.
Firstly, a significant move came from the Federal Reserve Board on April 24 when it opted to rescind prior guidance concerning banks’ involvement with crypto assets and stablecoins. This change aims to better align with the evolving risks in the crypto space and bolster the integration of such assets into the U.S. banking system. Member banks are now no longer required to provide advanced notifications before engaging in crypto-related activities, a shift that reverses protocols established in previous supervisory letters. The Fed has hinted at the possibility of issuing new guidance in the future to navigate these developments.
In other news, PayPal announced on April 29 that the SEC has dropped its investigation into the company’s stablecoin in its latest 10-Q filing. This marks a notable shift as the SEC appears to be reevaluating its enforcement approach to digital assets, which could have implications for similar companies in the sector. PayPal received a subpoena on this matter back in November 2023, making this development particularly noteworthy.
Moving on, Kraken is making waves with the launch of Kraken Embed, a new service aimed at allowing banks and fintech entities to offer cryptocurrency trading to their customers. Announced on April 30, Kraken Embed simplifies the technical infrastructure needed for these institutions to delve into crypto, with bunq already benefitting from the service, introducing crypto trading to its users in a matter of weeks.
On April 28, Mastercard revealed its latest initiative enabling customers and merchants to send or receive payments in stablecoins. In a partnership with various exchanges and wallet providers, Mastercard will integrate digital asset wallets into traditional card payment methods. Notably, merchants using Mastercard’s services can also receive stablecoin payments—an interesting step towards mainstreaming the use of cryptocurrencies. Additionally, the partnership with OKX will facilitate a streamlined experience for customers aiming to access their funds.
In the UK, the government has just released draft rules regulating crypto assets, announced on April 29. These proposed regulations are set to encourage market growth while ensuring consumer protection by placing certain service providers under the scrutiny of the Financial Conduct Authority. Chancellor of the Exchequer, Rachel Reeves, also expressed intentions for cooperation between the UK and U.S. regulators to underpin responsible digital asset growth, eyeing discussions in the upcoming UK-U.S. Financial Regulatory Working Group.
Finally, Arizona is on the brink of establishing the first state crypto reserve fund, with Senate Bill 1025 passing through the House with a vote of 31-25 on April 28. This bill, once signed by Governor Katie Hobbs, will give the state treasurer the green light to utilize assets seized in criminal cases to partially fund this proposed reserve. The initiative positions Arizona at the forefront of implementing a publicly funded crypto asset reserve and could have significant implications for states looking to do the same.
Overall, these updates underscore a rapidly evolving environment in the digital asset space, with regulatory movements and corporate innovations shaping the future of cryptocurrency.
