USA – NEW YORK Trends and Developments Contributed by: Dario de Martino and Susan Gault-Brown, A&O Shearman
ing thin liquidity, concentrated insider holdings and sig- nificant risk of consumer harm. April brought the year’s signature enforcement: Block, Inc (formerly Square) paid USD40 million to resolve significant Bank Secrecy Act/AML and virtual-currency compliance failings on its Cash App platform, including inadequate customer due diligence and a transaction-monitoring backlog. Approval is a starting line, not a finish. Custody, Insolvency and the September 2025 Refresh The 30 September 2025 guidance on custodial structures superseded its January 2023 predecessor and tightened expectations across the board. Cus- tomer virtual currency must be segregated, on-chain and in internal ledgers, either in customer-specific accounts or in clearly designated omnibus accounts held for customer benefit; pledging customer assets to secure or guarantee the custodian’s own obliga- tions is squarely prohibited, and any new sub-custody arrangement is treated as a material change requiring the Department’s prior approval, with the sub-custodi- an itself expected to be either DFS-chartered or sub- ject to a regime that the Department deems substan- tially similar. It is, in essence, an insolvency-proofing regime cast in the practical lessons of the last cycle. Two weeks earlier, on 17 September 2025, the NYDFS extended its 2022 blockchain-analytics guidance to all New York banking organisations and the licensed branches and agencies of foreign banks. Covered institutions are expected to consider analytics tool- ing where they engage in, are contemplating, or are exposed to virtual-currency-related activity, including through customers with disclosed or apparent crypto exposure. Traditional banks are expected to develop competence in monitoring blockchain flows. The Art and Science of Coin Evaluation The 2023 listing framework continues to operate as the working manual. The prohibition on self-certifying coins with low circulating supply relative to total supply is not arbitrary – it reflects hard-learned lessons about manip- ulation risks when insiders control large reserves. The scrutiny of bridge assets acknowledges that wrapped tokens introduce dependencies that cascade cata- strophically, as various bridge hacks have demonstrated. The requirement to evaluate “sufficient decentralisation”
forces firms to grapple with one of crypto’s most philo- sophical questions: when does a blockchain stop being genuinely decentralised and become merely distributed theatre? The NYDFS deliberately leaves ambiguity, plac- ing the premium on sophisticated judgement rather than checkbox completion. Leadership Change and a Sharper Enforcement Posture In October 2025, Adrienne Harris stepped down as NYDFS Superintendent after four years of service. Kaitlin Asrow, who had spent four years building one of the world’s largest digital-asset supervisory teams as Executive Deputy Superintendent for Research and Innovation, was named Acting Superintendent. The transition has been continuity, not pivot: licensing, sta- blecoin oversight and engagement with the federal framework remain front and centre. Enforcement has not slowed. On 7 August 2025, Paxos agreed to pay USD48.5 million – a USD26.5 million civil penalty plus USD22 million commit- ted to compliance remediation – to resolve a long- running investigation into AML, KYC, sanctions and due-diligence failures connected to its former BUSD partnership with Binance. In early 2026, the NYDFS issued cease-and-desist orders with civil penalties of USD100,000 to USD500,000 to three platforms serv- ing New Yorkers without a BitLicense. Furthermore, in January 2026, Manhattan District Attorney Alvin Bragg and State Senator Zellnor Myrie announced proposed CRYPTO Act legislation that would criminalise unli- censed virtual-currency business activity in New York, with penalties beginning as a Class A misdemeanour and escalating to Class E, D and C felonies based on transaction value and other aggravating factors. The civil-penalty regime has worked; its prosecutorial cousin appears to be on the way. The Federal Wave, and Why It Does Not Eclipse New York The federal landscape that finally exists in 2026 changes the calculus, but not in the way many pre- dicted. The GENIUS Act, signed on 18 July 2025, established the first federal framework for payment stablecoins and explicitly contemplated continued state oversight: state-qualified issuers up to USD10 billion in outstanding stablecoins may operate primar-
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