Courts and Regulators Grapple with Cross-Border Crypto Law Across Multiple Jurisdictions

Law and Ledger is a news segment focusing on crypto legal news, brought to you by Kelman Law – A law firm focused on digital asset commerce.

The opinion editorial below was written by Michael Handelsman for Kelman.Law.

This week’s developments in the global digital asset space demonstrate that courts, regulatory bodies, and enforcement agencies are continuing to address cryptocurrency through several distinct and rapidly evolving legal frameworks. Across multiple jurisdictions, ongoing disputes highlight the complex interplay between shifting enforcement policies, traditional banking oversight, state-level taxation, European union-wide regulatory classifications, and international cross-border asset recovery.

Among the standout developments, a federal court in New York declined to erase a settled regulatory enforcement case despite a notable shift in agency policy. Simultaneously, banking regulators in the United States documented widespread financial restrictions affecting digital-asset businesses, while litigation concerning an unusual state-level crypto transaction tax in Illinois moved deliberately toward an expedited judicial decision. Overseas, the European regulatory landscape shifted as a major stablecoin became classified as the first significant e-money token under strict new rules, and a high-stakes English asset-recovery proceeding delivered a landmark choice-of-law ruling regarding tens of thousands of seized bitcoin.

Federal Court Refuses to Vacate the CFTC’s Gemini Settlement

In a closely watched decision handed down on October 15, U.S. District Judge Alvin Hellerstein of the Southern District of New York denied a joint request filed by the Commodity Futures Trading Commission (CFTC) and Gemini Trust Company. The two entities had asked the court to vacate their earlier January 2025 consent order, hoping to wipe the slate clean following an internal policy shift at the regulatory agency.

The underlying legal dispute dates back to 2022, when the CFTC originally initiated a lawsuit against Gemini. The federal regulator alleged that the digital asset exchange had made false or misleading statements during the agency’s official review of a proposed bitcoin futures contract. After extended proceedings, Gemini eventually agreed to resolve the matter by paying a $5 million civil monetary penalty and accepting a permanent injunction designed to restrict certain future business practices.

However, earlier this year, the political and administrative landscape shifted. The CFTC joined forces with Gemini to seek formal relief from the judgment. Both parties concluded that, under the agency’s current enforcement standards and leadership priorities, the original case would likely never have been filed in the first place. Despite this unusual alignment between the regulator and the regulated entity, Judge Hellerstein’s October 15 order firmly declined to reopen the final judgment.

In his written opinion, the judge found that the moving parties had simply failed to satisfy the stringent legal standards required for post-judgment relief under federal rules. Crucially, the court reasoned that an administrative agency’s revised policy position does not automatically compel a federal court to vacate a previously entered judicial order. Furthermore, Gemini had aggressively litigated the matter for more than three years before making a calculated, voluntary decision to settle the case shortly before trial. Although the $5 million financial penalty had already been paid in full, the permanent injunction remains entirely in place, binding the exchange to its terms.

This judicial refusal carries profound significance for the broader cryptocurrency industry well beyond the immediate parties involved. The ruling underscores the reality that a future change in an administrative agency’s leadership or stated enforcement priorities will not automatically unwind a final, binding judicial order. Consequently, companies considering whether to settle contentious regulatory disputes must carefully assess the long-term, enduring consequences of accepting injunctive language, formal admissions, regulatory undertakings, and collateral administrative effects. An agency’s later willingness to revisit or soften its stance may ultimately prove insufficient if formal judicial approval is required to undo the past.

OCC Report Finds Large Banks Restricted Digital-Asset Businesses

The regulatory landscape surrounding traditional banking access for crypto firms also faced renewed scrutiny following a major disclosure from federal banking authorities. On October 14, the Office of the Comptroller of the Currency (OCC) released the comprehensive results of its targeted supervisory review into debanking practices across the nine largest national banks under its direct regulatory supervision.

According to the OCC’s official report and accompanying public announcement, all nine of the evaluated banking institutions maintained internal policies between 2020 and September 2025 that possessed the practical effect of restricting financial services based on lawful business activities and other nonfinancial considerations. Specifically, the federal agency identified digital-asset issuers, crypto exchanges, and administrative infrastructure providers as prominent industry sectors that were routinely subjected to these categorical service restrictions.

The agency’s exhaustive review attributed many of these exclusionary problems to broad, ill-defined reputational-risk policies that lacked objective, risk-based standards. To arrive at these findings, the OCC reviewed approximately 50,000 distinct documents totaling roughly 420,000 pages of internal bank records, alongside nearly 100,000 customer complaints. Armed with this data, the agency is now actively considering further structural changes to the regulatory and supervisory framework governing the nation’s largest financial institutions.

While the report does not establish a brand-new statutory right to a commercial bank account, nor does it prohibit banks from declining or terminating customer relationships for legitimate, documented financial-crime, credit, or operational reasons, it marks a significant shift. Financial institutions remain strictly obligated to manage legal risks associated with economic sanctions, anti-money laundering protocols, and fraud prevention. Nevertheless, the OCC’s findings are critically important for the crypto industry because they signal a much higher level of federal scrutiny regarding categorical exclusions and banking decisions that cannot be tied directly to documented, individualized risk assessments.

For digital-asset businesses actively seeking or maintaining banking relationships, the report serves as a practical warning. Companies should be fully prepared to proactively demonstrate their formal licensing positions, robust transaction-monitoring controls, transparent customer profiles, and rigorous approaches to sanctions and fraud prevention. Furthermore, firms that unfortunately experience sudden debanking should carefully preserve all formal communications from financial institutions identifying their stated reasons for termination, especially in cases where those stated rationales appear entirely unrelated to the company’s actual, documented risk profile.

Illinois Crypto Tax Litigation Moves Toward Expedited Resolution

At the state level, legal battles over specialized cryptocurrency taxation are moving swiftly through the court system. On October 13, a coalition of prominent crypto industry groups and the State of Illinois jointly asked the Circuit Court of Sangamon County to significantly expedite two active legal challenges targeting the state’s controversial Digital Asset Tax Act.

If allowed to take effect, the disputed legislation would impose a flat 0.2% excise tax on the monetary value of specified digital-asset purchases and secondary transfers within the state. The pending lawsuits challenge the statute on multiple grounds, alleging direct violations of both federal and state constitutional provisions, as well as unlawful preemption by the federal Internet Tax Freedom Act. To date, those core legal allegations have not yet been formally adjudicated on their merits.

According to the filing announcement published by the Crypto Council for Innovation, the litigating parties proposed an aggressive litigation schedule. Under the proposed timeline, opening summary-judgment motions would be filed by November 4, with comprehensive briefing fully completed by January 22, 2027. The parties formally requested a dedicated court hearing in February, culminating in a definitive judicial decision by March 1. While this proposed schedule still requires final formal approval from the presiding judge, enforcement of the state tax has already been legally stayed until July 1, 2027.

This latest procedural development does not represent a substantive ruling on the ultimate legality of the tax. Even so, the existing enforcement stay provides affected businesses with crucial additional preparation time, and the requested fast-track schedule could potentially yield a definitive merits-based decision long before the revised statutory effective date arrives.

Cryptocurrency exchanges, over-the-counter brokers, payment processors, and other commercial businesses with customers residing in Illinois should avoid treating the current procedural delay as a definitive invalidation of the law. Instead, firms should continue carefully evaluating whether the statutory language of the Act would cover their specific transactions, determine who would bear legal responsibility for actual collection, and assess how their backend technical systems would accurately calculate the tax if the ongoing industry legal challenges ultimately fail in court.

EBA Classifies USDC as the EU’s First Significant E-Money Token

Across the Atlantic, the regulatory architecture governing stablecoins in Europe reached a major milestone. On October 14, the European Banking Authority (EBA) formally classified USDC as the first "significant" e-money token under the comprehensive framework of the Markets in Crypto-Assets Regulation (MiCA).

According to the EBA’s official announcement, a total of 45 different e-money tokens have been officially notified under the MiCA framework, but USDC is the very first to formally meet the applicable regulatory significance criteria. Within the European Union, USDC is issued and managed by Circle Internet Financial Europe SAS.

Beginning on November 12, USDC will officially become subject to MiCA’s specialized dual-supervisory model designed specifically for significant e-money tokens. Under this cooperative oversight structure, the EBA will assume direct regulatory responsibility for critical operational areas, including own funds, reserve assets, liquidity requirements, and detailed recovery and redemption planning. Meanwhile, France’s Autorité de Contrôle Prudentiel et de Résolution will retain administrative responsibility for overseeing corporate governance, outsourcing arrangements, qualifying holdings, potential conflicts of interest, and ongoing fitness and propriety assessments of management.

This regulatory classification is materially different from prior European regulatory guidance, such as previous opinions concerning stablecoins that fail to comply with MiCA entirely. The EBA’s decision does not brand USDC as noncompliant; rather, it subjects the token to heightened, direct European-level supervision precisely because of its massive financial scale and systemic importance to the digital asset economy.

This development carries major implications that extend far beyond Circle itself. Cryptocurrency exchanges, digital custodians, and payment processing businesses that rely on USDC within their operations should anticipate a more formalized level of supervisory coordination. They should also expect more detailed operational inquiries concerning underlying reserve holdings, redemption protocols, and liquidity management arrangements. Furthermore, other stablecoin issuers whose transaction volumes are rapidly approaching the statutory significance thresholds should carefully study how regulatory responsibilities are being allocated between the EBA and their respective national regulators.

English Court Applies Chinese Law to Claims Over 61,000 Seized Bitcoin

In a landmark cross-border asset-recovery proceeding, the High Court in London issued a pivotal ruling on October 12, determining that Chinese law governs the complex ownership claims advanced by fraud victims seeking a stake in approximately 61,000 bitcoin currently seized by British law enforcement authorities.

The massive cache of digital currency is directly connected to Zhimin Qian, an individual who was criminally convicted following a sprawling, multi-million-dollar investment fraud scheme originally conducted within the borders of China. A group of international fraud victims argued during the proceedings that English property law should exclusively govern the dispute because the disputed bitcoin is currently held digitally and physically within the jurisdiction of the United Kingdom.

However, Mr. Justice Mark Turner rejected that local property argument, concluding instead that Chinese law must govern the core ownership claims. The judge reasoned that the underlying factual events—including the initial fraudulent misrepresentations, the physical and electronic transfers of fiat money, the formation of the underlying contractual relationships, and the immediate economic losses suffered by the victims—all occurred entirely within China.

Crucially, the ruling does not definitively decide who ultimately owns the multi-billion-dollar pool of bitcoin. Instead, the individual claimants must now establish their relevant property rights under Chinese civil law and subsequently demonstrate that those established foreign rights successfully satisfy the stringent statutory requirements mandated by the United Kingdom for returning seized criminal property. A further substantive court hearing is expected, and the affected claimants have already indicated their formal intention to appeal the choice-of-law determination.

For the broader landscape of cross-border crypto asset recovery, this judicial decision strongly underscores the principle that the physical, technical, or custodial location of seized digital assets may not determine the governing law for competing property claims. Instead, courts may look past the server locations and focus heavily on where the underlying fraudulent conduct, payment flows, and economic losses actually took place. Victims of international crypto fraud pursuing asset recovery must therefore develop rigorous choice-of-law analyses early in their legal strategies and secure qualified foreign-law expert evidence, rather than simply assuming that a seizure in a favorable domestic jurisdiction will automatically dictate asset ownership.

Businesses and individuals assessing regulatory compliance, ongoing litigation, specialized tax implications, or digital-asset recovery challenges arising from these evolving developments may contact Kelman PLLC to discuss their specific circumstances.

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