gm from Day One Law

gm from the Day One Law team!

This is the first edition of our weekly legal update, packed with four legal developments crypto founders and GCs should know. This update covers:

Let’s quickly discuss each.

1/4: SEC’s Stablecoin Statement

In another example of what regulatory guidance should have looked like over the past four years, the SEC’s Division of Corporate Finance followed their Statement on Meme Coins by publishing a similar Statement on Stablecoins. 

Their statement affirmed that certain stablecoins are not securities, but noted that the underlying redemption mechanisms, marketing, and reserves must be reviewed when making that classification. 

This statement is limited in scope to what they define as “Covered Stablecoins” — tokens that meet the following criteria: 

• Designed to maintain a stable value relative to the United States Dollar, or “USD,” on a one-for-one basis, 

• Can be redeemed for USD on a one-for-one basis (i.e., one stablecoin to one USD), and 

• Are backed by assets held in a reserve that are 

  • considered low-risk and 

  • readily liquid 

  • with a USD-value that meets or exceeds the redemption value of the stablecoins in circulation

The SEC’s statement did not express a view regarding any other types of stablecoins.

You should know: Confirmation of what many in the industry have long argued (not all USD-pegged tokens should be presumed securities) is progress, but it only applies to a narrow set of “Covered Stablecoins.” Many of the stablecoins actually used on-chain today (such as USDe from Ethena) don’t meet these criteria due to reserve structure or lack of fiat redeemability. That means teams integrating these tokens into interfaces, liquidity pools, or rewards systems could still face meaningful regulatory risk.

2/4: STABLE Act 

The House Financial Services Committee voted to advance the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, which has similar requirements as the Senate’s GENIUS Act. 

Both bills require issuers to:

1. Be federally registered as a permitted stablecoin issuer.

2. Maintain 1:1 reserves in fiat, short-term Treasuries, or equivalent assets.

3. Allow redemption for a fixed monetary amount.

4. Require public monthly reserve disclosures, anti-money laundering compliance, and enforcement mechanisms for violations. 

5. Not engage in rehypothecation (reusing reserves).

They differ in certain ways:

1. STABLE gives foreign issuers — like Tether — two years to comply with the U.S. rules (or be subject to a comparable regime), which could force the company to create a U.S. domiciled stablecoin, whereas GENIUS prohibits foreign issuance of USD stablecoins in the U.S. but allows for secondary trading.
   

2. STABLE enforces a two-year ban on algorithmic stablecoins pending the completion of a study, whereas GENIUS mandates a study without imposing an immediate ban.
   

3. GENIUS establishes a dual-system of oversight, allowing state-level regulation for issuers with under $10B market cap, provided state rules are “substantially similar” to federal regulations, with federal regulators for larger issuers. STABLE extends federal preemption over all stablecoin issuers. 

The competing language is expected to be reconciled before landing on the President’s desk for signature. 

You should know: Both Acts contain language problematic for some existing stablecoins, and raise concerns similar to the SEC’s guidance. The language in the reconciliation is likely to disqualify some stablecoins used on-chain and used in DeFi, and result in a narrowing of the stablecoin ecosystem toward fully reserved, regulated issuers. Founders and DAOs that integrate or rely on noncompliant assets need to be aware of what regulations could impact their products, even if they’re not the ones issuing the stablecoin.

3/4: FDIC Crypto Banking Letter

In 2022, the FDIC issued a Financial Institution Letter establishing a requirement for FDIC-supervised institutions — banks — to notify the FDIC prior to engaging in crypto-related activities, such as servicing crypto projects, after which the FDIC would “provide relevant supervisory feedback … as appropriate, in a timely manner.” 

On March 28, 2025, the FDIC rescinded that letter and affirmed that FDIC-supervised institutions may engage in crypto-related activities, provided “they adequately manage the associated risks.” Financial institutions may now engage in permissible crypto-related activities without requiring prior approval from the regulator. 

Permissible activities include:

1. Custodying crypto assets

2. Maintaining stablecoin reserves

3. Issuing tokens

4. Acting as market makers or exchanges or redemption agents

5. Participating in blockchain-based payment systems

6. Engaging in related activities, such as finder activities and lending

This builds off other crypto-friendly actions taken by the FDIC and OCC, including a similar letter from the OCC, following President Trump’s Executive Order on January 23, 2025.

Notably, the Federal Reserve Board has yet to adjust its existing guidance, which requires banks that they supervise to provide prior notice similar to the now rescinded FDIC requirement. This means banks are subject to different requirements depending on their primary regulator. 

You should know: We’ve seen a noticeable shift over the past few months, with clients onboarding to banking rails with less friction than in prior years. It’s no longer a given that founders will be denied a checking account for taking in investor funds during financing rounds, and founders are spending less time mitigating lack of access to TradFi rails. We expect to see substantial  innovation in crypto product features over the coming months as financial institutions update policies that previously limited (or even prohibited) integration into crypto products.

4/4: Department of Justice Memo on Regulation by Prosecution

On April 7, 2025, the DOJ circulated a memo to all department employees titled “Ending Regulation by Prosecution” with the following quotes:

• “The Justice Department will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets.”
  

• “Specifically, the Department will no longer target virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end users or unwitting violations of regulations [except where needed for investigations involving fraud, theft, hacks].
  

• “The Department’s investigations and prosecutions involving digital assets shall focus on prosecuting individuals who victimize digital asset investors, or those who use digital assets in furtherance of criminal offenses such as terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing.”

Importantly, prosecutors should “not charge regulatory violations in cases involving digital assets — including but not limited to unlicensed money transmitting … violations of the Bank Secrecy Act, unregistered securities offering violations, unregistered broker-dealer violations and other violations of registration requirements under the Commodity Exchange Act unless there is evidence the defendant knew of the licensing or registration requirement at issue and violated such a requirement willfully.” (Emphasis ours) 

In footnote 2, the memo carves out Section 1960(b)(1)(C) — when funds are known to the defendant to either have been derived from a criminal offense or are intended to be used to promote or support unlawful activity — which sets forth an explicit mens rea requirement that the government charged Roman Storm with, alleging that Storm knew “that the Tornado Cash service was being used to launder criminal proceeds.”

You should know: This is a much-needed and encouraging development for the future of the crypto industry in the U.S. While founders should still be mindful of enforcement inertia and the discretion prosecutors hold, this guidance (when followed) should reduce the outsized risk of civil or criminal liability based solely on utilization and development of crypto rails. Building products, participating in decentralized networks, or operating exchange interfaces should no longer trigger a presumption of wrongdoing, bringing us closer to being treated like every other startup in every other industry already is. 

As always, please reach out if you have questions about how the above relates to your ongoing work. 

We’ll be back with your next update in two weeks. Talk soon.

Nick Pullman
Day One Law

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