Lowenstein Crypto Weekly Digest: Key Legal Developments in Digital Assets

At Lowenstein Crypto, we provide expert guidance to digital asset and cryptocurrency projects, exchanges, and trading firms. With expertise spanning regulatory advice, transactional structuring, investigations, and adversarial matters—including commercial disputes and bankruptcy litigation—we engage deeply with the evolving landscape of the cryptocurrency market. This weekly digest highlights significant recent legal and regulatory developments, serving as a vital resource for industry participants navigating this dynamic terrain.

President Trump Pardons Binance Founder Changpeng Zhao

On October 23, former President Donald Trump exercised his constitutional power by pardoning Changpeng Zhao, the founder of cryptocurrency exchange Binance. Zhao had previously pleaded guilty to multiple money laundering charges in 2023 and served a four-month prison sentence, following a $4.3 billion settlement with the U.S. government. White House Press Secretary Karoline Leavitt framed the pardon as a response to the prior administration’s "war on cryptocurrency," emphasizing Trump’s commitment to advancing a more favorable regulatory atmosphere. With this pardon, Zhao could potentially re-enter the helm of Binance, transforming the operational landscape of the exchange he founded in 2017.

U.S. Senate Members Hold Private Roundtable With Crypto CEOs on Market Regulation

On October 22, bipartisan members of the U.S. Senate convened privately with leading cryptocurrency executives to discuss comprehensive market regulation. The discussions focused on crucial policy areas, including the delineation of jurisdiction between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Topics included the establishment of a federal framework for stablecoins, enhanced anti-money laundering measures, and stronger consumer protections. The talks also delved into issues around custody standards and the tax treatment of digital assets. Despite some tensions, there remains a robust bipartisan commitment to advancing market structure legislation, with optimism that a regulatory framework could come to fruition as early as 2026.

New York Lawmakers Introduce Bills to Tax High-Energy Crypto Mining

On October 17, Democratic lawmakers in New York introduced Assembly Bill A9138 and Senate Bill S8518—companion bills that propose an excise tax on electricity consumed by proof-of-work crypto mining operations. Spearheaded by Assemblymember Anna Kelles and Senator Liz Krueger, the legislation targets large-scale miners with energy consumption exceeding 2.25 million kWh per year, imposing rates of 2 to 5 cents per kWh. Importantly, mining facilities powered solely by off-grid renewable energy would be exempt, promoting sustainable practices. Critics argue that this measure could drive miners to relocate to more crypto-friendly jurisdictions, complicating New York’s position as a thriving market for digital assets. The proposed implementation date is set for January 1, 2027.

Wyoming Tests State-Backed Stablecoin Across Seven Blockchains

On October 20, Wyoming launched an ambitious pilot for its government-backed stablecoin, Frontier (FRNT), deploying 700,000 tokens across seven major blockchains. Fully collateralized by U.S. dollars and short-term Treasuries, with stringent overcollateralization requirements, the project aims to explore cross-chain functionalities to enhance accessibility. Managed by Franklin Advisers and subject to monthly audits by The Network Firm, this initiative reflects Wyoming’s commitment to leveraging blockchain technology for efficient government operations. While no public release date has been set, state officials promise ongoing transparency as they refine the token’s role in financial systems.

Federal Reserve Explores Direct Payment Access for Crypto Firms

On October 21, U.S. Federal Reserve Governor Christopher Waller laid the groundwork for potential changes in how smaller companies, including fintech and crypto firms, could access the central bank’s payment system. Speaking at the Payments Innovation Conference, Waller highlighted plans for new payment accounts designed to facilitate participation from smaller enterprises, a promising shift from the current model where access is largely reserved for major banks. While no formal proposal has been unveiled, this move could enhance innovation and competitiveness within the U.S. payments ecosystem, particularly for underserved markets.

HMRC Intensifies Crypto Tax Enforcement Amid Broader UK Digital Finance Push

The UK’s HMRC has ramped up its crypto tax enforcement, issuing 65,000 warning letters—more than double the previous year’s total—to investors suspected of tax underreporting or evasion. This surge in enforcement coincides with a broader global trend, including increased efforts in countries like India. Starting in 2026, HMRC’s oversight will be further reinforced under the Crypto-Assets Reporting Framework, which will require detailed reporting from exchanges. As the UK simultaneously seeks to modernize its financial infrastructure by lifting bans on crypto exchange-traded notes and advancing digital securities initiatives, a complex picture is emerging that balances innovation with stringent regulatory practices.

British Columbia Formalizes Ban on New Crypto Mining Connections

On October 20, British Columbia’s government introduced the Energy Statutes Amendment Act, effectively implementing a permanent ban on new cryptocurrency mining operations connecting to the BC Hydro electricity grid. This legislation formalizes a temporary halt initially introduced in December 2022 and reflects the province’s broader efforts to prioritize its energy resources. While existing mining operations remain unaffected, this directive underscores the government’s intent to support initiatives that provide greater economic and environmental benefits, positioning BC’s energy policy in alignment with its climate goals.

In this swiftly evolving landscape, recent developments underscore the interplay between regulatory frameworks and the burgeoning cryptocurrency sector, as market participants keenly adapt to the shifting legal environment.