CryptoLink Newsletter - August 2025 Updates

The push for digital assets legislation has slowed since its peak in July, largely due to Congress's August recess and its current focus on essential funding and defense authorization bills. However, the Senate Banking Committee has remained active, releasing an updated draft of the Responsible Financial Innovation Act of 2025 in early September. This new draft primarily includes technical changes to a bill that builds on the House’s CLARITY Act to establish a regulatory framework for digital assets. Chairman Tim Scott (R-SC) has announced his hope to advance the bill out of the Banking Committee by the end of September, but Senators from both parties appear skeptical of this timeline. In response to the new draft, a group of 12 Senate Democrats, including Sens. Kirsten Gillibrand (D-NY), Ruben Gallego (D-AZ), and Mark Warner (D-VA), released a “substantive road map” outlining seven key Democratic priorities to guide upcoming negotiations. These priorities include “Clarifying the Legal Status of Digital Assets and Regulator Jurisdiction,” “Preventing Illicit Finance,” and “Preventing Corruption and Abuse.” The statement emphasizes that a “bipartisan outcome will require time and cannot be rushed.” Similarly, some Republicans, most notably senior Banking Committee member Sen. John Kennedy (R-LA), have suggested that the legislation needs more attention before a vote. “I know I still have a lot of questions,” Kennedy said. Even if Republicans report the bill favorably out of the Banking Committee, it will need bipartisan support to pass the Senate, giving Democrats significant leverage in negotiations.

Recent enforcement actions in the crypto sector reflect a growing emphasis on user protection, anti-money laundering, and market integrity. U.S. federal and state agencies, including the SEC, DOJ, and New York’s DFS, are increasingly targeting alleged deceptive practices, misappropriation of funds, and failures in compliance programs, as seen in actions against platforms like MyConstant, Paxos, and Ripple Labs. Meanwhile, the former co-founder of Terraform Labs pleaded guilty to fraud that led to billions in user losses. Two individuals were sentenced in a $577 million Ponzi scheme in the Western District of New York, and Richard Kim, CEO of tech company Zero Edge Corporation, was indicted on securities and wire fraud charges. The DOJ seized more than $2.8 million in cryptocurrency related to a case pending in the Northern District of Texas. OFAC and the UK have separately issued sanctions to crack down on entities allegedly facilitating transactions linked to illicit activities or the circumvention of existing sanctions through the exploitation of crypto networks. These developments may signal a maturing enforcement landscape, where regulators are not only pursuing individual wrongdoers but also addressing systemic risks in digital asset markets.