USA Trends and Developments Contributed by: Andrea S Kramer, ASKramer Law
practices, including front-running, wash trading, pre-arranged trading, and any other manipulative or disruptive trading practices […]”. Along with such concerns, migration to 24/7 will inevitably raise new legal issues. For example, netting agreements and counterparty contracts would need to be modified to add crypto assets, especially in cross-product netting or cross-collateral arrangements. Substantial issues would need to be addressed with respect to netting of over-the-counter and exchange-traded products. In addition, individual agreements would need to be renegotiated. Artificial intelligence (AI) and blockchain technologies will have a major impact on the 24/7 transition, and each clearing firm will need to modify its own systems, infrastructure and related contractual agreements. These significant modifications and changes will require a substantial amount of lead time for the nec - essary planning and implementation. Strengthening the US Dollar Through Adoption of Dollar-Backed Stablecoins The administration’s support for dollar-backed sta - blecoins was first communicated in Executive Order 14178 with the stated purposes of “promoting and protecting the sovereignty of the United States dollar, including through actions to promote the development and growth of lawful and legitimate dollar-backed sta - blecoins worldwide”. The PWG Report noted that “US dollar-backed stablecoins represent the next wave of innovation in payments, and policymakers should encourage their adoption”. In July, the GENIUS Act was signed into law, setting out a regulatory framework for stablecoins to be more widely used in financial transactions. The law states that “payment stablecoins” are neither securities (sub - ject to SEC jurisdiction) nor commodities (subject to CFTC jurisdiction). Broadly, the Act: • provides an oversight system to allow certain state and federally regulated entities to issue stable - coins; • protects consumers by requiring stablecoin issu - ers to maintain a 1:1 reserve ratio backed with US
dollars, Treasury securities or certain other liquid assets; • requires issuers to disclose their reserve composi - tion on a monthly basis; • provides stablecoin holders with a priority claim in an issuer’s bankruptcy or insolvency; and • classifies stablecoin issuers as financial institu - tions subject to banking rules, including the Bank Secrecy Act and anti-money laundering (AML) laws, and requires compliance with “Know Your Customer” (KYC) identification requirements and transaction monitoring. Modernising AML Rules to Combat Fraud To successfully encourage crypto innovation and expansion, the PWG Report notes the need to pro - tect the US crypto market “by mitigating and com - bating illicit use”. Crypto, “like traditional assets, [is] subject to abuse by bad actors – terrorists, drug traf - fickers, state-sponsored hackers, human traffickers, fraudsters, sanctions evaders, and others”. To combat abuse, “law enforcement needs the tools to hold those who use digital assets for illegal activities account - able”, including AML/CIF (Combat Illicit Finance) and sanctions that are tailored to crypto risks and industry structure. Because of its decentralised nature, crypto has gained the reputation of harbouring fraudsters and hiding ille - gal transactions. In many circumstances, personally identifiable information and a bank account are not required to process crypto transactions. The PWG acknowledges that to combat crypto-specific fraud law enforcement needs appropriate tools, including AML/CIF and sanctions. The global discussion is broadening now, with the Bank of International Settle - ment raising recent concerns around “traditional AML policies – the very thing lacking in [DeFi]”. The DOJ, SEC, CFTC and FinCEN are all focused on prosecuting bad actors, with increased regulatory inter-agency collaboration taking place in 2025. Law enforcement agencies work closely with blockchain analytic firms, using AI and machine learning to track down illegally obtained crypto and process large amounts of data. The immutable nature of blockchain makes crypto fully traceable.
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