Digital Assets Recent Updates – February 2025

Client Alert | March 6, 2025

We are pleased to provide you with the February edition of Gibson Dunn’s digital assets regular update. This update covers recent legal news regarding all types of digital assets, including cryptocurrencies, stablecoins, CBDCs, and NFTs, as well as other blockchain and Web3 technologies. Thank you for your interest.

ENFORCEMENT ACTIONS

UNITED STATES

SEC Dismisses Crypto Enforcement Actions
The SEC has agreed to dismiss several crypto enforcement actions, including those against Coinbase, Consensys, and Cumberland DRW. These requested pauses on crypto litigation under acting SEC Chairman Mark Uyeda signals a potential shift in enforcement priorities. Coinbase; Coindesk; The Block.
SEC Closes Investigations into OpenSea, Robinhood Crypto, Uniswap Labs, and Gemini
On February 21, OpenSea announced that the SEC officially closed its investigation into the non-fungible token marketplace without pursuing enforcement action. According to OpenSea, the SEC Staff had issued it a Wells notice in August 2024, in which the SEC Staff stated that the SEC was planning to pursue an enforcement action against the platform, alleging OpenSea may have been operating as an unregistered securities marketplace. On February 24 and February 26, Robinhood, Uniswap, and Gemini made similar announcements that the SEC had closed investigations into their platforms. X (OpenSea); Robinhood; Uniswap; X (Gemini).
HashFlare Operators Plead Guilty to Crypto Fraud
On February 12, two operators of HashFlare, a defunct cryptocurrency mining service, pleaded guilty to charges of conspiracy to commit wire fraud, in the U.S. District Court for the Western District of Washington, in connection with their operation of a crypto Ponzi scheme affecting hundreds of thousands of individuals globally. From 2015 to 2019, HashFlare allegedly sold more than $577 million in mining contracts despite not possessing the required computing capacity to perform the mining it purported to perform. The two operators agreed to forfeit assets worth more than $400 million. Sentencing is scheduled for May 8. DOJ; The Block.
Las Vegas Business Owner Indicted for Alleged Crypto Ponzi Scheme
On February 14, Brent Kovar, owner of Profit Connect, was arrested pursuant to an indictment charging him with wire fraud, mail fraud, and money laundering, between 2017 and 2021. Kovar allegedly misrepresented that Profit Connect used artificial intelligence powered by a supercomputer to mine cryptocurrency, paid a fixed rate of return, and provided a 100% money-back guarantee while, in reality, Kovar allegedly used investor funds for his personal benefit, to operate Profit Connect, and to repay other investors as if such proceeds came from crypto mining. DOJ; The Block.
Canadian Man Indicted for Alleged $65 Million Fraudulent Scheme
On February 3, a criminal indictment was unsealed in the U.S. District Court for the Eastern District of New York, charging Andean Madjedovic with, among other things, wire fraud and money laundering. Madjedovic allegedly exploited vulnerabilities in two decentralized finance protocols to obtain approximately $65 million in digital assets from investors in the protocols between 2021 and 2023. According to the indictment, Madjedovic borrowed hundreds of millions of dollars in tokens to engage in deceptive trading that he knew would cause the smart contracts underlying the protocols to falsely calculate key variables, which allowed Madjedovic to withdraw millions of dollars of investor funds at artificial prices. According to the government, Madjedovic is currently at large. DOJ; Indictment.
Market Maker CLS Global Agrees to Plead Guilty to Charges Relating to Cryptocurrency “Wash Trading”
On January 21, DOJ announced that CLS Global, a financial services firm that functioned as a market maker, agreed to resolve criminal charges in the U.S. District Court for the District of Massachusetts relating to its fraudulent manipulation of cryptocurrency trading volume. According to the terms of the plea, which was accepted by a judge on February 7, 2025, CLS Global will pay $428,059 to the government, and will be prohibited from participating in U.S. cryptocurrency markets. On January 21, CLS Global also agreed to resolve parallel claims brought by the SEC. DOJ.
U.S. Attorney’s Office for the District of Massachusetts Files Civil Forfeiture Action to Recover Proceeds of Cryptocurrency Fraud Scheme
On February 19, the U.S. Attorney’s Office for the District of Massachusetts filed a civil forfeiture action to recover various cryptocurrencies, with an estimated value of more than $1 million, which are alleged to be proceeds of an online investment fraud scheme, sometimes called a “pig-butchering” scheme. According to DOJ, the civil forfeiture action stems from an investigation into a social media group called “Financial Independence Forum,” that instructed victims to transfer funds to an allegedly fraudulent trading platform. DOJ; Complaint.

REGULATION AND LEGISLATION

UNITED STATES

Senate Votes to Repeal IRS DeFi Broker Rule
In a major bipartisan win for the crypto industry, the Senate voted 70-27 to pass a joint resolution under the Congressional Review Act that would repeal a Biden-era rule requiring DeFi platforms to report user transactions to the IRS. The resolution is expected to pass in the House and be signed by the President. Once enacted into law, the resolution will not only effectively repeal the DeFi broker rule but also will prohibit the IRS from issuing a new rule that is “substantially the same” as the repealed rule absent new legislation. The resolution will not repeal the IRS’s July 2024 broker rule applicable to custodial digital asset trading platforms. Coindesk.
Former CTFC Commissioner Brian Quintenz Nominated to Lead the CFTC
On February 12, Brian Quintenz was nominated as Chairman of the Commodity Futures Trading Commission (CFTC). Quintenz previously served as a CFTC Commissioner between 2017 and 2021 and most recently worked as head of policy for the cryptocurrency arm of venture-capital firm a16z. Known as a crypto advocate, Quintenz stated in his announcement on X that the CFTC is “well poised to ensure the USA leads the world in blockchain technology and innovation.” On February 25, the CFTC announced that Democratic Commissioner Christy Goldsmith Romero will step down upon Quintenz’s confirmation, after which the Commission will be comprised of three Republicans and one Democrat. X; CoinDesk; Cointelegraph; CFTC Press Release.
SEC Guidance Says Meme Coin Transactions Generally Do Not Implicate Federal Securities Laws
On February 27, the SEC’s Division of Corporation Finance published a staff statement stating its “view that transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws.” The SEC defined meme coins as “a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.” As defined in the guidance, meme coins “typically share certain characteristics,” including that they “typically are purchased for entertainment, social interaction, and cultural purposes,” and “typically have limited or no use or functionality.” “In this regard, meme coins are akin to collectibles.” Based on these characteristics, the guidance concludes that transactions in meme coins do not involve “investment contracts” under the Howey test. Among other reasons, the guidance says, “meme coin purchasers are not making an investment in an enterprise” because “their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise.” In addition, “any expectation of profits that meme coin purchasers have is not derived from the efforts of others,” but rather “from speculative trading and the collective sentiment of the market, like a collectible.” The guidance does “not extend to the offer and sale of meme coins that are inconsistent with the descriptions set forth above, or products that are labeled ‘meme coins’ in an effort to evade the application of the federal securities laws by disguising a product that otherwise would constitute a security.” SEC Guidance.
New Proposed Legislation Would Establish Stablecoin Regulatory Framework
On February 4, Chairman Tim Scott (R-S.C.) joined Senate Banking Committee members Senators Bill Hagerty (R-Tenn.) and Cynthia Lummis (R-Wyo.), as well as Senator Kirsten Gillibrand (D-N.Y.), in introducing the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. This legislation seeks to establish a clear regulatory framework for payment stablecoins by defining “payment stablecoins and set[ting] up the procedures for issuing them, including establishing the Federal Reserve as watchdog for the big bank issuers and the Officer of the Comptroller of the Currency as regulator for nonbank issuers of more than $10 billion.”“Passing clear and sensible regulations for stablecoins is critical to maintaining U.S. dollar dominance, promoting responsible innovation, and protecting consumers,” said Senator Gillibrand. Senate; CoinDesk.
Jonathan Gould, Former Bitfury Executive, Nominated to Lead the OCC
On February 11, President Trump nominated Jonathan Gould, former chief legal officer of Bitfury (a blockchain technology company), to head the Office of the Comptroller of the Currency (OCC), which regulates U.S. national banks and federal savings associations. If confirmed by the Senate, Gould would lead the OCC for a five-year term. The Block; Cointelegraph.
SEC Commissioner Peirce Sets Out Plans for New Crypto Task Force
On February 4, SEC Commissioner Hester Peirce, head of the SEC’s new Crypto Task Force, issued a release that sets out priorities and plans for the newly established Crypto Task Force. The Task Force will focus on registered offerings, custody solutions for investment advisers, security status, crypto lending and staking, crypto exchange-traded products, cross-border experimentation, clearing agencies and transfer agents, and special purpose broker dealers. Peirce also urged crypto companies to be patient as the SEC decides how to “disentangle” itself from the litigation initiated under former Chair Gary Gensler. SEC Release; Thomson Reuters; CoinDesk.
The SEC Announces Creation of the Cyber Fraud Unit
On February 20, the SEC announced the creation of the Cyber and Emerging Technologies Unit (CETU), which will focus on combatting cyber-related misconduct and fraud. The CETU will replace the Crypto Assets and Cyber Unit and will be led by Laura D’Allaird, who was the co-chief of the Crypto Assets and Cyber Unit. The CETU will consist of fraud specialists and attorneys who will focus on, among other things, fraud involving blockchain technology and digital assets. SEC Press Release; The Block.
State Legislatures Continue to Propose State-Level Strategic Crypto Reserve Bills
During the month of February, at least 14 states introduced bills to establish frameworks for investing in digital assets within their respective state treasuries. While no such bill has been enacted, it has been proposed to the state legislature in a total of at least 26 states. Many bills include the stipulations that the amount of crypto investments by the state may not exceed a certain percentage of the total size of public funds and that the state may invest only in digital assets with a minimum market cap ($500 billion in Utah, for example). Bills in some states (such as Ohio) aim to establish a strategic reserve for bitcoin specifically. The Block.

INTERNATIONAL

Czech Republic Attempting to Eliminate Long-Term Crypto Gains Taxes
On February 7, Czech President Petr Pavel signed a bill exempting crypto users from paying taxes on digital assets that are held for three years. Additionally, transactions up to CZK 100,000 ($4,136) do not need to be reported to Czech taxing authorities. This bill was not well received by the President of the European Central Bank, Christine Lagarde. Lagarde said that she is confident that bitcoin won’t be entering the reserves of any of the EU central banks. CoinDesk.
Hong Kong’s SFC Proposes Expanding Crypto Regulatory Staff
On February 3, Hong Kong’s Securities and Futures Commission (SFC) proposed hiring eight new staff members as part of its budget for the next fiscal year. These hires are to focus on crypto regulatory regimes, market surveillance, and enforcement investigations. Hong Kong has opened its doors to crypto firms, and it appears to be continuing its drive to become a crypto hub. The Block ; CoinDesk .
Hong Kong SFC Sets Out New Roadmap to Develop Hong Kong as a Global Virtual Assets Hub
On February 19, Hong Kong’s SFC published its five-pillar “ASPIREe” roadmap that outlines 12 major initiatives to enhance the security, innovation and growth of Hong Kong’s virtual asset market. The 12 initiatives include establishing licensing regimes for virtual asset OTC trading and virtual asset custody services, exploring changes to the custody requirements for licensed virtual asset trading platforms, exploring a regulatory framework for professional investor-exclusive token listings and virtual asset derivative trading, and considering allowing staking and borrowing/lending services, among many other initiatives. The roadmap represents a welcome, forward-looking commitment to addressing the virtual asset market’s most pressing challenges in Hong Kong, thus encouraging digital-asset firms to set up or expand in Hong Kong. SFC.
U.S., UK, and Australia Jointly Sanction Zservers
On February 11, the U.S. Department of Treasury’s Office of Foreign Assets Control, Australia’s Department of Foreign Affairs and Trade, and the UK’s Foreign Commonwealth and Development Office jointly sanctioned Zservers, a Russia-based bulletproof hosting (BPH) provider, for its involvement with ransomware attackers, including LockBit, which notably extracted $120 million in Bitcoin from victims. BPH providers are known to sell tools to mask locations, identities, and activities online. Department of Treasury Press Release ; Cointelegraph ; Decrypt.
Dubai Virtual Assets Regulatory Authority Warns of Meme Coin Risks and Market Manipulation
On February 13, Dubai’s Virtual Assets Regulatory Authority (VARA) issued a consumer alert on the risks of investing in meme coins, citing their speculative nature, volatility, and susceptibility to market manipulation. All virtual asset activities in Dubai must comply with VARA regulations, and unauthorized promotions may face enforcement action. VARA; Cointelegraph.
Dubai Financial Services Authority Adds USDC and EURC to List of Recognized Crypto Tokens
On February 17, the Dubai’s Financial Services Authority (DFSA) expanded its list of Recognized Crypto Tokens—which currently includes Bitcoin, Ethereum, Litecoin, Toncoin and Ripple—to include the stablecoins USDC and EURC. Recognized Crypto Tokens are digital assets which can be used or transacted in the Dubai International Financial Centre. DFSA.
The UAE’s Securities and Commodities Authority Seeks Feedback on Draft Regulations for Security and Commodity Tokens
On January 22, the UAE’s Securities and Commodities Authority (SCA) published a draft regulation on security tokens and commodity tokens, inviting industry stakeholders to provide feedback. This marks a milestone in the country’s capital markets, integrating securities and commodities with modern financial technologies. The draft, which includes 18 articles, outlines issuance, trading, settlement, and compliance obligations for these tokens. SCA.

CIVIL LITIGATION

UNITED STATES

The SEC Files a Motion to Voluntarily Dismiss Dealer Rule Appeal
On February 19, the SEC filed an unopposed motion to voluntarily dismiss its appeal in the Fifth Circuit in the “Dealer Rule” case. The SEC had appealed two rulings in related cases by Judge Reed O’Connor that vacated the SEC’s Dealer Rule on the ground that the rule improperly expanded the definition of “dealer” under the Exchange Act. One of the cases was brought by the Crypto Freedom Alliance of Texas and Blockchain Association; the other was brought by the National Association of Private Fund Managers, Alternative Investment Management Association, Ltd., and Managed Funds Association. Motion to Dismiss Appeal; Crypto Freedom Alliance District Court Opinion; National Association of Private Fund Managers District Court Opinion; CoinDesk.
The FDIC Releases Documents in Response to Coinbase FOIA Request Showing FDIC Debanking of Crypto
On February 5 and February 21, in response to a FOIA lawsuit directed by Coinbase, the FDIC released 183 documents spanning hundreds of pages revealing the agency’s systematic attempts during the prior Administration to pressure banks into debanking digital-asset firms. In a statement, Acting Chairman Travis Hill stated that the documents show that banks’ requests to engage in crypto-related activities “were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence…, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity.” Hill explained that “these and other actions [by the FDIC] sent the message to banks that it would be extraordinarily difficult—if not impossible—to move forward. As a result, the vast majority of banks simply stopped trying.” Hill additionally noted that the FDIC is actively reevaluating its supervisory approach to provide a pathway for institutions to engage in such activities while still adhering to safety principles. FDIC.
The Second Circuit Rules for Uniswap in Securities Class Action Appeal
On February 26, the Second Circuit affirmed the dismissal of federal securities law claims brought against Uniswap Labs, a decentralized cryptocurrency exchange, in an April 2022 class-action lawsuit. The Second Circuit affirmed the district court’s ruling that Uniswap was not a statutory seller under Section 5 of the Securities Act because it does “not hold title to the tokens placed in the liquidity pool by third party users of the platform.” In rejecting claims under Section 29(b) of the Exchange Act, the Second Circuit said that “it ‘defies logic’ that a drafter of a smart contract, a computer code, could be held liable under the Exchange Act for a third-party user’s misuse of the platform.” The Second Circuit also remanded for the district court to consider the plaintiffs’ state-law securities claims, which Uniswap did not contest. Summary Order.

INTERNATIONAL

Ex-CEO of Crypto Exchange Wins Wrongful Dismissal Claim Against Crypto Exchange Three Fins
On February 19, the General Division of the High Court of Singapore ruled in favor of Georg Höptner, the former CEO of crypto exchange Three Fins, in a wrongful-dismissal lawsuit. Höptner was awarded nearly $2.5 million after alleging his termination was orchestrated to avoid fulfilling contractual bonus obligations. His contract stipulated a significant bonus upon completing two years or a termination bonus if dismissed without cause before that period. In October 2022, he was summarily dismissed for alleged unauthorized relocations and fund misappropriation. Judge Chua Lee Ming determined the dismissal was unjustified, noting Höptner had informed relevant parties about his relocations without objections. The court concluded the termination aimed to evade substantial bonus payments and awarded Höptner damages covering unpaid salary, allowances, notice period compensation, and the termination bonus. ICLG; Court Judgment.
Singapore Court Recognizes Terraform Labs’ Chapter 11 Liquidation Plan
On February 21, the Singapore International Commercial Court (SICC) issued a written judgment granting Terraform Labs’ application for recognition of its U.S. Chapter 11 liquidation plan and a U.S. court order confirming the plan. In reaching its decision, the SICC held that the chapeau of Art 21(1) of the UNCITRAL Model Law on Cross-Border Insolvency as adopted in Singapore gives the court an expansive and open-ended discretion to grant appropriate relief and allows the court to be guided by principles of comity and a spirit of cooperation with foreign courts. Court Judgment.
Robinhood to Launch Crypto Offerings in Singapore
Robinhood Markets Inc. plans to introduce cryptocurrency trading services in Singapore later this year, following the anticipated completion of its $200 million acquisition of European digital-assets exchange Bitstamp Ltd. The acquisition is expected to conclude in the first half of 2025, with the rollout of crypto offerings commencing shortly thereafter. Bitstamp had previously secured in-principle approval (IPA) from the Monetary Authority of Singapore to provide digital asset-related services in the country. This strategic move aims to leverage Bitstamp’s IPA, allowing Robinhood to provide a regulated crypto offering in the country and facilitating Robinhood’s broader expansion into the Asian market. Blockhead; Coindesk.

SPEAKER’S CORNER

UNITED STATES

Federal Reserve Chair Confirms the Fed Will Not Issue a CBDC
At the February 11 Senate Banking Committee meeting, Federal Reserve Chair Jerome Powell confirmed that the Fed would not issue a Central Bank Digital Currency (CBDC) during his tenure, which is scheduled to end in May 2026. This follows opposition to a CBDC from President Trump and current lawmakers due to privacy and other concerns. Cointelegraph; Senate Banking Committee.

INTERNATIONAL

Bank of England Governor: Bitcoin and Stablecoins Require Different Regulatory Approaches and UK exploring CDCS
In a Q&A session following a speech delivered on February 11 at the University of Chicago Booth School of Business, the Governor of the Bank of England, Andrew Bailey, stated that Bitcoin and stablecoins require different approaches to regulation. According to Bailey, stablecoins in particular should be regulated more stringently because they are primarily used for payments and users expect them to function like money. Governor Bailey also confirmed a central bank digital currency was still also being considered by the UK. Bank of England.

OTHER NOTABLE NEWS

CFPB Directed to Suspend Supervision Activity and Declines Future Funding
On February 9, Russell Vought, the acting head of the Consumer Financial Protection Bureau (CFPB) announced that the bureau will not be taking its next draw of funding from the Federal Reserve, signaling a wind down of CFPB operations. The CFPB was directed by Vought to stop work on proposed rules, to suspend effective dates on any rules finalized but not yet effective, and to cease all supervision and examination activity. Cointelegraph; The Associated Press; NPR.
Hackers Steal $1.5 Billion in Digital Assets from Cryptocurrency Exchange Bybit
On February 21, hackers stole approximately $1.5 billion in digital assets from Bybit’s Ethereum “cold wallet,” an offline storage system. The attackers gained control of the cold wallet and transferred over 400,000 ETH and stETH to an unidentified address. Bybit assured users that all other cold wallets are secure, that withdrawals are functioning normally, and that Bybit has more than enough assets to cover the loss and will use a bridge loan to ensure availability of user funds, if necessary. It is suspected that the hackers are connected to North Korea’s Lazarus Group. Bybit.
Standard Chartered Bank, Animoca Brands and Hong Kong Telecom Establish Joint Venture to Issue Hong Kong Dollar-Backed Stablecoin
On February 17, Standard Chartered Bank announced that it, Animoca Brands and Hong Kong Telecom have agreed to establish a joint venture with the intention to apply for a license from the Hong Kong Monetary Authority to issue an Hong Kong Dollar-backed stablecoin after the passage of the Stablecoins Bill. The Stablecoins Bill was introduced by the Hong Kong government on December 6, 2024, and proposes to introduce a licensing regime applicable to persons who issue fiat-referenced stablecoins in Hong Kong, or who issue fiat-referenced stablecoins that purport to maintain a stable value with reference to Hong Kong Dollar, or who actively market their issuance of fiat-referenced stablecoins to the Hong Kong public. Standard Chartered; Hong Kong government.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, Jeff Steiner, Sara Weed, Sam Raymond, Nick Harper, Amanda Goetz, Nicholas Tok, Cody Wong, and Chad Kang.

FinTech and Digital Assets Group Leaders / Members:

Ashlie Beringer, Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (+1 202.955.8256, mbopp@gibsondunn.com

Stephanie L. Brooker, Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)

Jason J. Cabral, New York (+1 212.351.6267, jcabral@gibsondunn.com)

Ella Alves Capone, Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)

M. Kendall Day, Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)

Sébastien Evrard, Hong Kong (+852 2214 3798, sevrard@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com)

Martin A. Hewett, Washington, D.C. (+1 202.955.8207, mhewett@gibsondunn.com)

Sameera Kimatrai, Dubai (+971 4 318 4616, skimatrai@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Stewart McDowell, San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)

Hagen H. Rooke, Singapore (+65 6507 3620, hhrooke@gibsondunn.com)

Mark K. Schonfeld, New York (+1 212.351.2433, mschonfeld@gibsondunn.com)

Orin Snyder, New York (+1 212.351.2400, osnyder@gibsondunn.com)

Ro Spaziani, New York (+1 212.351.6255, rspaziani@gibsondunn.com)

Jeffrey L. Steiner, Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)

Eric D. Vandevelde, Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)

Benjamin Wagner, Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)

Sara K. Weed, Washington, D.C. (+1 202.955.8507, sweed@gibsondunn.com)

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.

Digital Assets Recent Updates – February 2025

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