Quantum Updates 36 | March 2025

US SEC Dismisses Civil Enforcement Action Against Coinbase Amid Crypto Regulatory Shift

On 27 February 2025, the United States Securities and Exchange Commission (US SEC) published Joint Stipulation to Dismiss, and Release and thereby dismissed its civil enforcement action against Coinbase Inc. and Coinbase Global Inc. The lawsuit, originally filed on 6 June 2023, accused Coinbase of operating as an unregistered securities exchange, broker, and clearing agency. Following the launch of the US SEC’s Crypto Task Force on 21 January 2025, the Commission exercised discretionary policy considerations to withdraw the case.

• The lawsuit progressed until 27 March 2024, when the United States District Court for the Southern District of New York partially granted Coinbase’s motion for judgment on the pleadings.
• On 7 January 2025, the court approved Coinbase’s request for an interlocutory appeal, allowing it to challenge specific aspects of the ruling.
• The US SEC clarified that dismissing the case does not imply any stance on the allegations, stating, “The Commission’s decision to seek dismissal of this litigation does not reflect the Commission’s position on any other case.”
• Coinbase agreed to withdraw its interlocutory appeal, filed under Coinbase, Inc. v. SEC, No. 25-145 (2d Cir.), and waived any claims for attorney’s fees or costs related to the enforcement action.
• This decision suggests a potential shift from enforcement-led policymaking to broader public consultation and regulatory clarity initiatives.

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US SEC Division of Corporation Finance Issues Staff Statement on Meme Coins

On 27 February 2025, the United States Securities and Exchange Commission (US SEC) Division of Corporation Finance issued staff Statement on Meme Coins. The statement asserts that meme coin transactions generally do not constitute the offer and sale of securities under the United States Securities Act of 1933, meaning purchasers and holders do not receive US federal securities law protections. The assessment applies the Howey test and concludes that meme coins are speculative digital assets, akin to collectibles, rather than investment contracts.

• Meme coins are defined as crypto assets inspired by internet memes, trends, or social phenomena, primarily driven by speculation and community engagement rather than intrinsic value.
• The United States Division of Corporation Finance asserts that meme coins fail to meet the Howey test, as they do not involve pooled investments or an expectation of profit derived from managerial efforts.
• Meme coin valuations are dictated by market demand and social sentiment, similar to collectibles rather than regulated financial instruments.
• This staff statement does not constitute a formal SEC rule or guidance, and does not have legal authority or regulatory enforcement status.

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United States SEC Commissioner Caroline Crenshaw Criticises Division of Corporation Finance’s Statement on Meme Coins

On 27 February 2025, United States SEC Commissioner Caroline Anne Crenshaw issued a response statement, challenging the United States Division of Corporation Finance’s legal reasoning in its Staff Statement on Meme Coins. Crenshaw argues that the United States Division of Corporation Finance’s position misapplies the Howey test, lacks a clear legal definition of meme coins, and could create a regulatory loophole allowing crypto issuers to evade oversight under federal securities laws.

• Commissioner Crenshaw disputes the United States Division of Corporation Finance’s application of the Howey test, stating that meme coins often involve a common enterprise where both promoters and purchasers profit from price appreciation.
• She reasons that meme coins are not purely cultural or entertainment-based assets, as many are issued for financial gain, with promoters benefiting from early holdings and speculative trading.
• The statement criticises the lack of a precise legal definition of meme coins, pointing out that the United States Division of Corporation Finance’s description could apply broadly to many crypto assets, making its regulatory classification legally ambiguous.
• The statements issued by United States Division of Corporation Finance’s and highlights internal SEC disagreements over how meme coins should be regulated, with potential implications for future enforcement actions and investor protections.
• If the United States Division of Corporation Finance’s position is upheld, meme coins may fall outside federal securities laws, reducing oversight and limiting regulatory intervention.
• Commissioner Crenshaw’s statemnst points to future judicial challenges or policy shifts, and could lead to a reassessment of meme coin classifications and regulatory clarification in USA. regulation.

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US SEC to Hold Roundtable on Artificial Intelligence in Financial Industry

On 28 February 2025, the United States Securities and Exchange Commission (US SEC) announced it will host a roundtable discussion on Artificial Intelligence (AI) in financial markets on 27 March 2025 at its Washington, D.C. headquarters. The event is open to both in-person and virtual attendees and will address the risks, benefits, and governance of AI in the financial sector.

• US SEC Acting Chairman Mark Uyeda, along with Commissioners Hester Peirce and Caroline Crenshaw, will provide remarks on AI’s regulatory implications and its impact on financial decision-making.
• The roundtable will explore how AI is transforming trading, investment management, risk assessment, and compliance, while addressing concerns around bias, transparency, and systemic risks.
• Regulatory challenges and ethical considerations will be in focus, with discussions on oversight frameworks for responsible AI adoption.
• The US SEC invites broad industry participation to inform policy and regulatory developments, gathering input from financial institutions, technology firms, academia, and policymakers.
• AI Roundtable will endorse topics like, best practices for AI deployment, risk mitigation strategies, and investor protection measures within AI-driven financial ecosystems.
• The agenda, participant list, and procedures for public comments will be published on the US SEC AI Roundtable event page in the coming weeks.

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UK Court Sentences Olumide Osunkoya to Four Years for Illegal Crypto ATM Operations

On 28 February 2025, the United Kingdom Financial Conduct Authority (UK FCA) announced that Olumide Osunkoya, 46, had been sentenced to four years in prison for illegally operating a crypto ATM network. This marks the first criminal sentencing for unregistered crypto asset activity in the UK. Osunkoya pleaded guilty to five charges at Southwark Crown Court on 30 September 2024, and confiscation proceedings under the United Kingdom Proceeds of Crime Act 2002 have been initiated to recover his financial gains.

• Between 30 December 2021 and 12 March 2022, Osunkoya operated 28 crypto ATMs across multiple locations under his company, GidiPlus Ltd, despite being denied UK FCA registration.
• UK regulations prohibit the operation of crypto ATMs without prior approval and licensing from the UK FCA. Osunkoya attempted to evade detection by transferring control of 12 crypto ATMs under a false identity and company name.
• The UK FCA’s investigation found that Osunkoya failed to conduct mandatory anti-money laundering (AML) checks, exposing the ATMs to potential use for illicit activities.
• In addition to operating without authorisation, Osunkoya was convicted of forgery, using false identity documents, and possessing criminal property, including £19,540 in cash linked to illegal ATM operations.
• The UK FCA has been cracking down on illegal crypto ATMs since 2023, conducting 38 inspections that led to the disruption of 30 machines. As a result, the number of crypto ATMs listed on CoinATMRadar in the UK dropped from over 80 in 2022 to zero by 2024.

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United States SEC Establishes Crypto Task Force Under Commissioner Hester Peirce

On 3 March 2025, the United States Securities and Exchange Commission (US SEC) announced the establishment of the United States Crypto Task Force, a dedicated unit tasked with advising the US SEC on cryptocurrency regulation and industry-related challenges. The Task Force is composed of staff from the Acting Chairman’s office and multiple US SEC divisions, with a mandate to develop regulatory solutions for the evolving crypto market.

• Richard Gabbert is appointed as Chief of Staff, overseeing the Task Force’s operations and coordination with US SEC leadership.
• Michael Selig is appointed as Chief Counsel, responsible for legal oversight and ensuring compliance with federal securities laws.
• Taylor Asher is appointed as Chief Policy Advisor, leading policy formulation and engagement with industry stakeholders.
• Sumeera Younis is appointed as Chief of Operations, managing the implementation of regulatory initiatives.
• The Task Force includes 10 Senior Advisors, bringing expertise from various regulatory, legal, and financial sectors to address crypto market risks.
• The unit will focus on identifying gaps in existing regulations, developing oversight mechanisms, and collaborating with market participants to create clearer compliance frameworks.

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United States SEC Crypto Task Force to Host Public Roundtable on Security Status of Crypto Assets

On 3 March 2025, the United States Securities and Exchange Commission (US SEC) announced that its Crypto Task Force will conduct a series of public roundtables to address regulatory uncertainties surrounding crypto asset classification. The initiative, titled “Spring Sprint Toward Crypto Clarity,” will begin on 21 March 2025 with an inaugural session, “How We Got Here and How We Get Out – Defining Security Status.” This event will bring together industry experts, regulators, and the public in discussions on the security status of digital assets and the regulatory framework for compliance.

• The inaugural roundtable will take place on 21 March 2025 at the US SEC headquarters in Washington, D.C., from 1:00 p.m. to 5:00 p.m. It will be open to the public with limited in-person attendance, and the discussions will be streamed live on official US SEC website.
• The event will feature expert panels and breakout discussions for participants to contribute insights on regulatory challenges and potential solutions.
• The Roundtable will focus on the question, whether certain digital assets qualify as securities under US federal law, a un clarified regulatory stance affecting market participants, enforcement actions, and investor protections.
• Regulatory clarity from the roundtables could influence US SEC enforcement actions, legislative efforts, and international cooperation in the governance of digital assets.
• US SEC Commissioner Hester Maria Peirce, who leads the Crypto Task Force, stated the importance of public engagement to create a workable regulatory framework for the crypto industry.

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HKMA Announces Hong Kong Green Week 2025 to Advance Sustainability in Asia

On 3 March 2025, the Hong Kong Monetary Authority (HKMA) announced that Hong Kong will host the second Hong Kong Green Week 2025 from 8 to 12 September 2025. Themed “Forging a Sustainable Future Together”, the event will focus on accelerating collaboration in green finance and low-carbon innovation.

• The Climate Business Forum: Asia Pacific 2025, co-hosted by the HKMA and the International Finance Corporation (IFC), will serve as the flagship event, convening industry leaders and experts in sustainable business and climate finance.
• Discussions will focus on Asia’s low-carbon transition, strategies for financing sustainability, and fostering an inclusive and resilient economic model for the region.
• A comprehensive programme of conferences, roundtables, workshops, and networking events will take place throughout the week, covering sustainability topics such as green finance, carbon markets, and climate-resilient infrastructure.
• The event will attract a broad international audience, including financial institutions, corporates, industry associations, policymakers, and academic institutions, fostering cross-sector collaboration.
• Hong Kong Green Week 2025 will showcase climate finance initiatives in Hong Kong, bring together stakeholders and drive forward regulatory developments, investment strategies, and technological advancements to promote a greener and more sustainable economic landscape in Asia.

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US SEC Initiates Proceedings to Determine Approval of Bitwise 10 Crypto Index Fund Listing on NYSE Arca

On 3 March 2025, the United States Securities and Exchange Commission (US SEC) published in “Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change to List and Trade Shares of the Bitwise 10 Crypto Index Fund under Proposed NYSE Arca Rule 8.800-E (Commodity- and/or Digital Asset-Based Investment Interests) announced initiation of proceedings to determine whether to approve or disapprove a proposed rule change filed by NYSE Arca, Inc. (NYSE Arca) for the listing and trading of shares of the Bitwise 10 Crypto Index Fund. The fund would track a diversified portfolio of ten major cryptocurrencies under the newly proposed NYSE Arca Rule 8.800-E, which establishes a framework for digital asset-based investment interests. The US SEC is seeking further evaluation to ensure compliance with regulatory requirements under the United States Securities Exchange Act of 1934.

• The proposed rule change was initially filed on 14 November 2024 and published in the Federal Register on 3 December 2024. The US SEC extended its review period on 14 January 2025, setting a 3 March 2025 deadline for a decision.
• The US SEC has now instituted proceedings under Section 19(b)(2)(B) of the Securities Exchange Act, meaning further assessment is required before approval or disapproval.
• The Bitwise 10 Crypto Index Fund would hold a diversified portfolio of ten major digital assets, including Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP (XRP), Cardano (ADA), Avalanche (AVAX), Chainlink (LINK), Bitcoin Cash (BCH), Polkadot (DOT), and Uniswap (UNI).
• Coinbase Custody Trust Company, LLC will serve as the custodian for crypto assets, while The Bank of New York Mellon will act as custodian for cash holdings, fund administrator, and transfer agent.
• The fund will rebalance monthly based on the free-float market capitalisation of its digital asset holdings, with oversight by Bitwise Index Services, LLC, an affiliate of Bitwise Investment Advisers, LLC.
• The US SEC’s evaluation will determine whether the proposed listing meets the requirements of Section 6(b)(5) of the Securities Exchange Act, which mandates that exchange rules be designed to prevent fraud and market manipulation while protecting investors and the public interest.
• The US SEC has invited public comments to assess whether the proposal satisfies regulatory requirements, with a rebuttal period extending beyond the initial submission deadline.

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US SEC Considers Nasdaq Rule Change to List and Trade Commodity- and Digital Asset-Based Investment Interests

On 3 March 2025, the United States Securities and Exchange Commission (US SEC) published a notice “Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, to Adopt Nasdaq Rule 5712 to Provide for the Listing and Trading of Commodity- and Digital Asset-Based Investment Interests and to List and Trade Shares of the Hashdex Nasdaq Crypto Index US ETF under Proposed Nasdaq Rule 5712 regarding a proposed rule change submitted by The Nasdaq Stock Market LLC (Nasdaq). The proposal is amended to establish Nasdaq Rule 5712, which would allow the listing and trading of Commodity- and Digital Asset-Based Investment Interests, including securities backed by commodities, digital assets, derivatives, and cash. The rule would permit the listing of the Hashdex Nasdaq Crypto Index US ETF under this framework.

• Nasdaq Rule 5712 introduces specific listing standards for securities issued by trusts, limited liability companies, or similar entities that hold commodities, digital assets, or derivatives.
• To enhance market surveillance, at least 90% of a listed fund’s holdings must be in assets subject to oversight by the Intermarket Surveillance Group (ISG) or covered by a Comprehensive Surveillance Sharing Agreement (CSSA).
• Securities listed under Nasdaq Rule 5712 must meet minimum trading criteria, including maintaining at least 50,000 securities outstanding and a total market value of at least $1 million, with an additional requirement of at least 50 holders after the first 12 months of trading.
• Under the amended rule, real-time transparency is mandated, requiring the value of underlying assets to be updated every 15 seconds and market makers to report trading activity to the exchange.
• Nasdaq retains the authority to suspend or delist securities if compliance requirements are not met, ensuring adherence to regulatory standards.
• The proposal if implemented will transition the previously approved Hashdex Nasdaq Crypto Index US ETF from Nasdaq Rule 5711(d) to the new Nasdaq Rule 5712.
• The rule change ensures compliance with the United States Commodity Exchange Act, Section 1a(9), standardising the classification and oversight of commodity-linked digital asset investment products.
• The US SEC has invited public comments to assess the regulatory and market impact of the proposal before making a final determination.

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Singapore Government Tightens Crypto Payment Regulations, Bans Credit Card Transactions for Digital Tokens

On 5 March 2025, the Monetary Authority of Singapore (MAS) published its Oral Reply to Parliamentary Questions on tightening regulations for digital payment token service providers. Delivered by Mr. Alvin Tan, Minister of State, on behalf of Deputy Prime Minister Gan Kim Yong, the response highlighted the government’s concerns over cryptocurrency-related financial risks, particularly for young investors. The statement follows a parliamentary inquiry by MP Yip Hon Weng, questioning the rationale behind stricter regulations and their impact on consumers aged 18 to 25, a demographic with rising crypto adoption.

• Credit card transactions for cryptocurrency purchases are now prohibited, preventing consumers from using high-interest credit for digital asset investments.
• Retail investors are banned from using leverage or borrowing to trade cryptocurrencies, mitigating the risk of compounded financial losses.
• MAS stated that digital assets are speculative and high-risk, with volatile price movements that could lead to financial losses, particularly when debt is involved.
• The restrictions are intended to prevent excessive debt accumulation, given that credit card interest rates are higher than other forms of credit.
• Mr. Alvin Tan warned that investors must remain aware of crypto risks, stating that while regulations can mitigate leverage-related dangers, they cannot shield consumers from the inherent volatility of digital assets.

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