General – Fintechnically Speaking

June 18, 2025June 18, 2025 by Duane Morris

Emerging Technologies In Harmony AI, Crypto, and Policy Innovation

By Agatha H. Liu
This article was originally published by the California Lawyers Association. This article has been reprinted with permission.

The nation is well positioned to further develop artificial intelligence (AI) and promote its application, while the government renews its interest in cryptocurrency (crypto) as a significant part of digital assets. Both AI application and crypto hold huge potential to advance collective prosperity, yet they are rooted in complex, disruptive technologies that pose significant challenges for policymakers. Traditionally, the two fields have followed separate trajectories, but their convergence is increasingly evident.

Read the full article on the Duane Morris website.

May 28, 2025June 2, 2025 by Mauro M. Wolfe

Bringing Clarity to the New SEC Policy on Crypto: No Free Passes for Fraud

By Mauro Wolfe, Vincent Nolan and David Golden

Since taking office in January, the Trump administration has staked out a crypto-friendly approach. It has advocated for stablecoin and crypto legislation to bring regulatory clarity to the industry to encourage innovation and allow markets to develop. Additionally, the Securities and Exchange Commission (SEC) under the Trump Administration has stayed or dismissed several cases that the previous administration brought against digital asset leaders, the administration disbanded the Department of Justice’s National Cryptocurrency Enforcement Team, and pardoned BitMEX.

But on May 20, 2025, with little fanfare, the SEC filed a complaint against Unicoin, Inc. (Unicoin) and certain of its executives in the United States District Court for the Southern District of New York, alleging a $100 million “massive securities offering fraud.” The question to consider is whether the Unicoin case reflects a position contrary to the Administration’s pro-crypto stance. As we will describe below, it appears that there are limits to how crypto-friendly the SEC is willing to be. Where exactly are the lines and how clear those lines are remains to be seen.

According to the SEC’s complaint, from February 2022 to the present, Unicoin raised over $100 million from 5,000 investors by selling “Unicoin Rights Certificates,” which promised rights to crypto assets called “Unicoin Tokens.” The SEC claims that these sales were based on false and misleading statements and material omissions. First, Unicoin misrepresented that certificates were SEC-compliant and asset-backed by billions of dollars in real estate and equity interests in pre-IPO companies, when in fact the assets were never worth more than a fraction of the represented value and Unicoin never took title to most of those assets. Second, Unicoin falsely claimed that the tokens and certificates were “SEC-compliant,” SEC-registered,” or “U.S.-registered.” Third, Unicoin overstated its sales of certificates and tokens. Finally, Unicoin falsely overstated the financial condition of the company. These misrepresentations were allegedly promoted through many avenues of advertisement, including paid promotional interviews, social media, TV ads, billboards, and events.

The question to consider is why Unicoin and how is this case different than any other offering case filed by the SEC in the past? The answer may be that the alleged wrongful conduct here goes far beyond a technical failure to file a registration and goes to the nature of the business and the related representations made. The administration appears to be staking out its position that while prosecutions of mere regulatory violations are not favored, fraudulent statements and misrepresentations about crypto products and the business, coupled with real harm to investors, will exceed the Administration’s tolerance, even in a crypto-friendly environment.

It should be noted that the company and executives have publicly denied the SEC’s allegations. Although General Counsel Richard Devlin settled the SEC’s claims against him for a civil penalty of $37,500 without admitting or denying any allegations, CEO Alexander Konanykhin stated that the allegations made by the SEC are “blatantly false,” and further stated, “I intend to prove in court that they constitute yet another case of gross abuse of power.” Konanykhin rejected an offer from the SEC to settle the dispute. The company is preparing its defense and a spokesperson for the company has stated, “Unicoin, the only fully U.S.-registered, U.S.-regulated, U.S.-audited, and U.S.-publicly reporting cryptocurrency company, has consistently complied with all regulations.”

It may be premature to draw any conclusions based on one case, but the question that we may be asking in the future is whether the SEC is drawing a hard line in the sand on false statements about the business, but not concerned about technical violations that were, in large measure, caused by the regulator itself.

Our collective experience is that we should expect to see an increase in fraud. As FOMO increases over the digital asset sector, bad actors will take advantage of investors.

The broader concern is that the SEC casts such a broad net that honest businesses are caught in the enforcement net of the regulators. Ultimately, in order to avoid this risk, entrepreneurs need to take compliance and regulation seriously. Projects and business models need to incorporate sound regulatory principles and best practices in order to demonstrate good faith and understanding. We will continue to monitor SEC enforcement and report new cases as they develop.

About Duane Morris

Duane Morris is committed to keeping clients informed and helping them maintain a set of best practices designed for digital asset creators and users as they navigate this market and foster trust and confidence within the investment community.

For More Information

If you have any questions about this blog post, please contact Mauro M. Wolfe, Vincent J. Nolan III, David Golden, any of the attorneys in our Financial Technology Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: The content provided is for informational purposes only and does not constitute financial, investment, or legal advice. While our law firm has substantial experience in cryptocurrency law and regulation, we do not offer advice or opinions on cryptocurrency as an investment. Consult a financial advisor before investing.

April 30, 2025May 28, 2025 by Tim Stafford

Texas Legislature is Looking to Provide a Liability Shield and Recognition to Decentralized Autonomous Organizations Formed in the State

On April 30, the Texas House of Representatives Committee on Trade, Workforce, and Economic development advanced HB 4518 to the full chamber. This bill recognizes decentralized autonomous organizations (“DAOs”) as legal entities by enabling decentralized unincorporated nonprofit associations (“DUNAs”) in Texas. Texas will be the second state to enact this legislation, which is “a problem” for Representative Keresa Richardson (R-31) who gasped, “We let Wyoming beat us?” affronted that DUNAs were first introduced and signed into state law in 2024 through the Wyoming Decentralized Unincorporated Nonprofit Association Act. Adopting a similar showing of Texas pride while first introducing the bill, HB 4518 author Rep. David Cook (R-96) stressed the importance of passing the bill by declaring “Texas should be the jurisdiction of choice for the digital asset and cryptocurrency revolution.”

February 24, 2025May 28, 2025 by Duane Morris

The SEC’s New Cyber and Emerging Technologies Unit: What Does This Mean for the Crypto Enforcement Agenda?

By: Mauro Wolfe, Vincent J. Nolan III, Carolina Goncalves and Matthew A. Catania

On February 20, 2025, the Securities and Exchange Commission (SEC) announced the creation of the Cyber and Emerging Technologies Unit along with a list of its enforcement priorities which focus, in particular, on fraud. Crypto entrepreneurs and those looking to increase their involvement in the U.S. crypto and blockchain markets should note that the listed priorities contemplate that some blockchain and crypto activities will remain within the definition of securities and will therefore be subject to SEC jurisdiction if fraud is committed, making the Congress’ work on pending blockchain, crypto and stablecoin legislation all important for the advancement of the digital assets markets.

Read the full story on the Duane Morris LLP website.

Disclaimer: The content provided is for informational purposes only and does not constitute financial, investment, or legal advice. While our law firm has substantial experience in cryptocurrency law and regulation, we do not offer investment advice or opinions on cryptocurrency as an investment. Consult a financial advisor before investing.

February 10, 2025March 28, 2025 by Duane Morris

The Challenge of Digital Asset Regulation of NFTs

By: Mauro Wolfe and Vincent J. Nolan III

Following the January 23, 2025 White House Executive Order on crypto (see our post on that executive order here), and its aggressive timeline for developing a crypto-friendly regulatory environment, it appears that all levers of government have been switched “on” when it comes to the world of digital assets. From the Executive Office working group that includes the top agencies and government departments, to the halls of Congress, discussion of all things crypto – and especially the development of legislation (i.e., revamping FIT21), is at the forefront in Washington. In this article, we take a look at one aspect of the discussion: NFTs as digital assets and current proposed legislation to regulate.

NFTs are unique digital assets that represent the ownership of a digital item or real-world asset that are recorded on a blockchain. “Non-fungible” means that, unlike, say Bitcoin, where one Bitcoin is exactly the same as another Bitcoin in the same way one dollar bill is identical to another one-dollar bill, an NFT is a unique, one-of-a-kind digital asset showing ownership of a specific and unique asset, like a piece of art.

So, what is so special about NFTs and why are we interested? The future of NFTs could be big. There are numerous and interesting use cases for NFTs beyond digital images of apes (digital collectibles). The use cases include: digital identification, real estate, art and music, healthcare and medical research, metaverse transactions, car ownership, insurance, consumer rewards, banking and credit. The options are limitless. By some estimates, the global NFT market could reach $14 billion USD by 2027, or $265 billion by 2032, at a growth rate of 30% or more. So, getting legislation and regulation on NFTs wrong could be a deal breaker. NFTs use of blockchain makes proof of ownership fast, efficient, tamperproof, and verifiable.

What is the current state of legislative proposals on NFTs? For today’s article, we want to focus on the resurrection of the New Frontiers in Technology Act (the NFT Act), originally released in September 2024 in the 118^th Congress by Congressman Scott Timmons (R-SC) and co-sponsored by Congressman Ritchie Torres (D-NY). That bill has resurfaced and is aimed to be added in the crypto legislation passed by the House last year, known as FIT21, which is now in the process of being revised in preparation for another attempt at passage.

How does the NFT Act propose to deal with NFTs? The answer is: it is limited and “it’s complicated.” The NFT Act expressly removes “Covered Non-Fungible Tokens” from the definition of a security or an investment contract under US securities law and the now well-known Howey test. What kind of digital assets fall within this category? The NFT Act includes NFTs which are, “developed primarily for personal, family, or household consumption,” and includes things like: art, music, literary works, intellectual property, collectibles, merchandise, virtual land, or video game asset, among other categories.

However, within that definition, there are specific exclusions that relate to how the NFT is marketed or used. Specifically, if the NFT is a work of art, but the NFT is “marketed by an issuer or promoter… primarily as an investment opportunity,” or promises activity designed to increase the value of the NFT, then the NFT is no longer a Covered Non-Fungible Token and may be a security. Further, other exclusions apply. For instance, NFTs that represent digital ownership of securities or commodities will not be included in the definition of a Covered Non-Fungible Token. In effect, it appears that there are two categories for NFTs. They are either a security or a commodity. Finally, the NFT Act requires the Comptroller General of the U.S. to study NFTs and report to Congress within one year, addressing questions about the NFT market.

The NFT Act still needs some work. As drafted, it appears that the NFT Act does not directly address the role of NFT marketplace exchanges. Additionally, the NFT Act is very narrow and provides limited protection for market participants. For example, if a fine artist paints a picture, and creates an NFT through an art dealer who specializes in NFT art for collectors and an LLC subsequently acquires the NFT, is that a security or a commodity, or both? The answer is unclear and “it’s complicated.” Hopefully, we receive more clarity from Congress and the relevant regulators as to how NFTs will be treated and how this will all work.

Duane Morris continues to monitor developments in digital assets and the blockchain sector so we can adequately advise our clients. We look forward to seeing the next proposed piece of legislation that impact NFTs.

January 28, 2025March 28, 2025 by Duane Morris

Coinbase Enters Crypto Lending Market for Second Time with Morpho Labs Collaboration

By Rubina Karapetyan, Joseph Silvia and Mauro Wolfe

Earlier this month, Coinbase, the largest cryptocurrency platform in the U.S., partnered with Morpho Labs, the biggest onchain lending platform on Coinbase’s Base network, to introduce a bitcoin-backed loan service. This new service, which operates on Base, Coinbase’s Ethereum layer-2 network, lets users borrow up to $100,000 in USD Coin (USDC) by using their Bitcoin as collateral and is available to all U.S. residents, except those in New York.

Borrowing USDC against Bitcoin has been possible on platforms like Morpho and other DeFi services for some time. However, with this new collaboration, Coinbase has integrated Morpho’s lending services directly into its own interface, which it believes will attract borrowers with easier access and a more user-friendly experience. The service aims to close the gap between holding crypto assets for the future and putting them to use today. Although it currently will only support Bitcoin, Coinbase plans to eventually extend the service to other crypto tokens.

Coinbase merely facilitates the exchange; it does not directly issue loans. Borrowers can always choose when they want to pay off their loans because there are no set repayment schedules. Interest rates are adjusted by Morpho based on real-time market conditions. Unlike traditional loans that depend on credit scores, crypto loans instead require substantial collateral. Morpho’s platform ensures a minimum collateral ratio of 133%. If the loan balance, including accrued interest, reaches 86% of the collateral’s value, liquidation is automatically triggered, as well as repayment and penalty fees. Borrowers are allowed to adjust their loan-to-value ratio whenever they want as long as the ratio stays above the required threshold. Through the Coinbase app, Coinbase will share liquidation trigger warnings if the loan balance is reaching the threshold, giving borrowers a chance to cure.

According to the Coinbase website, to access the service, borrowers can go to the Cash tab within their Coinbase app, click on “Borrow,” and enter the amount of USDC they want to borrow against their Bitcoin. After confirming the amount, the bitcoin that is pledged as collateral is converted to Coinbase Wrapped BTC (cbBTC) token, a bitcoin-backed token issued by Coinbase, and then transferred onchain to a Morpho smart contract. Morpho will then disburse the USDC loan, which borrowers will be able to see instantly in their Coinbase account.

This launch marks Coinbase’s second entry into the Bitcoin lending market. In November of 2023, the platform officially ended its “Borrow” program, which allowed borrowers to get cash loans backed by their bitcoin.

The new service has advantages as well as risks. Selling bitcoin can result in capital tax gains or losses. For this reason, as well as others, many crypto traders are hesitant to sell their holdings. Now, they can instead borrow against their Bitcoin and use their digital assets, likely avoiding a sale and tax consequences. However, the tax implications remain unclear, mainly because the conversion from bitcoin to cbBTC might be deemed a taxable event in the future. In addition, the volatility of bitcoin prices could affect the value of the pledged collateral, possibly leading to liquidation if the required thresholds are not satisfied. Finally, while using a DeFi platform like Morpho may offer greater transparency, smart contracts historically carry risks, such as bugs and hacks. We will continue to watch these and related developments as the industry continues to mature and work through challenges.

January 24, 2025March 28, 2025 by Duane Morris

By Executive Order, the Trump Administration Takes a Stance in Support of Crypto

By Mauro M. Wolfe and Vincent J. Nolan III

On January 23, 2025, President Donald Trump took the first major step to fulfill his campaign promise to make the United States the “crypto capital of the planet,” issuing an executive order entitled “Strengthening American Leadership in Digital Financial Technology.” The order outlines a strategic framework for promoting U.S. leadership in digital assets and financial technology.

Read the full story on the Duane Morris LLP website.

January 16, 2025March 28, 2025 by Duane Morris

The CFPB’s New Proposed Rule to Protect Crypto Consumers from Theft

By Mauro M. Wolfe and Carolina Goncalves

Like banks, cryptocurrency firms are not immune from attacks designed to steal consumer assets, which attacks reportedly caused billions in crypto losses for consumers in 2024 alone. As a result, the US Consumer Financial Protection Bureau (CFPB) proposed a rule intended to protect crypto users from illicit activities by requiring cryptocurrency firms to reimburse consumers for stolen funds. The Electronic Funds Transfer Act (EFTA) and Regulation E currently limit consumer liability for unauthorized electronic fund transfers (EFTs) and impose investigation and error resolution obligations (e.g., funds in reserve) on financial institutions when notified that a consumer’s funds have been compromised. The proposed rule would provide similar consumer protections in the event of an unauthorized cryptocurrency transfer from an account established primarily for personal, family, or household purposes.

The EFTA and Regulation E apply to an EFT authorizing a financial institution to debit or credit a consumer’s account. The CFPB’s definition of “financial institution” includes nonbank entities that (a) hold a consumer account or (b) issue an access device and agree with a consumer to provide EFT services. The CFPB has also determined that “funds” include digital assets, like stablecoins, that operate as either a medium of exchange or as a means of paying for goods and services. The CFPB’s definition of “account” is also broad enough to include nonbank asset accounts (e.g., accounts on gaming platforms, virtual currency wallets) with features similar to those of more traditional deposit or savings accounts, such as paying for goods or services from multiple merchants, having the ability to withdraw funds or obtain cash, or conducting person-to-person transfers.

The proposed rule intends to establish a more consistent application of the EFTA and Regulation E to a range of “emergent payment mechanisms” by requiring “market participants offering new types of payment mechanisms to facilitate electronic fund transfers [to] understand whether their account meets the definition of ‘other consumer asset account,’ including whether it is established for ‘personal, family, or household purposes.’” The proposed rule is open to public comments until March 31.

We anticipate material changes to digital asset and blockchain policy when the next chapter begins under the Trump administration. The broader question for consideration is where consumer protection will fit within crypto regulations. We hope for the benefit of retail investors that it is of paramount importance.

January 16, 2025March 28, 2025 by Duane Morris

Coinbase Wins Another Partial Victory in its Battle for Clarity on Crytpo Regulation

By Sheila Raftery Wiggins and Vincent J. Nolan III

Following its win in the Southern District of New York (SDNY) last week pausing the Securities and Exchange Commission’s (SEC) enforcement suit against it (see our recent blog post on the decision here), Coinbase, Inc. has won another partial victory in the Third Circuit Court of Appeals. This time, Coinbase successfully petitioned the Third Circuit to require the SEC to explain to Coinbase the reasons why it will not engage in crypto rulemaking.

Over the last several years, the crypto community has been very critical of the SEC’s enforcement by litigation approach, arguing that more clarity was needed on how to comply with the law. In July 2022, Coinbase filed a petition with the SEC, seeking to force the agency to engage in rulemaking and promulgate new rules clarifying how and when digital assets qualify as securities under existing federal securities laws. After some skirmishing in the Third Circuit over the timing of the SEC’s response, in December 2023, the SEC denied Coinbase’s rulemaking petition.

The SEC’s written denial was short, its reasoning contained in a single paragraph. It alluded to three bases for its decision: (1) it disagreed with Coinbase’s concerns (as set forth in the rulemaking petition) that application of existing securities law to the crypto environment was “unworkable;” (2) the SEC had other priorities; and (3) the SEC preferred to proceed incrementally.

While the SEC “suggested” these The Third Circuit found the SEC’s order “conclusory and insufficiently reasoned” and therefore in violation of the procedures under the Administrative Procedures Act. The court noted that any of the three grounds asserted in the SEC’s decision “could be sound and independently sufficient bases for denying a rulemaking petition.” But the SEC was required to provide more than conclusory statements and had to explain its reasoning to demonstrate that “its decision considered all important aspects presented by the petition and resulted from reasoned decision making.”

As a result, the Third Circuit granted Coinbase’s petition in part and remanded the matter to the SEC for a more complete explanation of the basis for the denial of the rulemaking petition.

The victory is only partial, however. Coinbase had also asked the Third Circuit to require the SEC to engage in rulemaking. The court declined to order the agency to institute rulemaking proceedings, finding that this was not the “extreme situation” that would warrant the “extraordinary remedy” of a court forcing an administrative agency to engage in rulemaking.

While the judges in the appellate panel were in agreement on the decision, there was some disagreement as to Coinbase’s argument that it had been denied fair notice and due process. Judge Stephanos Bibas, who joined the majority opinion, filed an interesting concurring opinion to address what he saw as a constitutional issue that is “not yet teed up,” but is waiting in the wings. Based on the due process principle that regulated parties should know what is required of them so they may act accordingly, Judge Bibas found that the SEC “repeatedly sues crypto companies,” yet “will not tell them how to comply” with the law. “[T]hat caginess,” according to Judge Bibas, “creates a serious constitutional problem; due process guarantees fair notice.”

While neither the decision itself nor Judge Bibas’ concurrence bring the clarity ultimately sought by the crypto community, the Third Circuit’s decision to require the SEC to explain its denial of Coinbase’s crypto rulemaking petition, coupled with last week’s decision by the SDNY to pause the SEC’s enforcement suit against Coinbase to allow the Second Circuit to opine on the SEC’s application of the securities laws to digital assets, ensure that these issues will now be addressed during and most likely by the Trump administration, which has promised to create a crypto-friendly environment.

January 14, 2025March 31, 2025 by Duane Morris

Court “Pauses” SEC Litigation Against Coinbase to Allow Appeal to Clarify the Relationship Between Crypto-Assets and Securities Law

By David Golden and Vincent J. Nolan III

Judge Katherine Polk Failla from the U.S. District Court for the Southern District of New York has paused the Securities and Exchange Commission’s (SEC) lawsuit against Coinbase, Inc. This rare move will allow Coinbase to appeal Judge Failla’s previous decision to deny Coinbase’s efforts to dismiss the SEC’s lawsuit.

In April 2024, Judge Failla, applying the Howey test used by courts to determine whether cryptocurrency transactions should be classified as investment contracts under federal securities laws, had denied Coinbase’s motion to dismiss the SEC’s complaint and allowed the suit to proceed, accepting (at that stage) the SEC’s argument that “Coinbase’s business of intermediating transactions in cryptocurrency amounted to the operation of an unregistered brokerage, exchange, and clearing agency in violation of federal securities laws.”

But on January 7, 2025, Judge Failla recognized that the varying decisions in recent years regarding application of the Howey Test (including the Ripple and Terraform cases) demonstrated fundamental difficulties in applying Howey to crypto transactions. Central to this decision was Coinbase’s argument that the tokens at issue are akin to commodities because they have no inherent value outside of the “ecosystem” in which they were issued or consumed and cited examples of other such commodities, including carbon credits, emissions allowances, and even expired Taylor Swift concert tickets. Judge Failla acknowledged the court’s use of the “digital ecosystem” in the application of the Howey test, noting that her own prior decision denying Coinbase’s motion to dismiss had concluded that “crypto-asset transactions met the ‘common enterprise’ prong of Howey because crypto-asset purchasers’ ability to profit depends on the development and expansion of the ecosystem.” Judge Failla ultimately agreed with Coinbase at least to the extent that “[t]here is indeed substantial ground to dispute how Howey is applied to crypto-assets and the role of the surrounding digital ecosystem in that analysis.”

This decision does not bring the clarity that many seek in the ongoing battle between the SEC and the crypto community. However, the “pause” could give much-needed time for Congress to enact new legislation, for a circuit court to rule on the application of the Howey test, for the Trump Administration to issue new executive orders, or for the new SEC Chairman to settle the case and provide further guidance on the issue.