08-29-2025 
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United States President Donald Trump keeps expanding crypto options, but decentralized finance (DeFi) devs are crying foul after one of their own had a very bad day in court.
- Trump executive orders on retirement, debanking
- Operation Choke Point 3.0?
- DeFi celebrates SEC liquid staking guidance
- Tornado Cash verdict a mixed bag for Storm
- NYDFS fines Paxos over BUSD
On August 7, Trump issued two executive orders that expand the options available to digital asset operators and investors. One of these orders will allow crypto to make inroads into Americans’ retirement planning, while the other promises to spank any banker who dares to turn away crypto business.
The fact sheet covering the first order confirms last month’s reports that Trump would allow employer-sponsored 401(k) retirement programs to include tokens (along with other speculative products) in their investment mix. The order states its goal as allowing investors to “access alternative assets for better returns and diversification.”
Specifically, the Department of Labor has been told to reexamine its guidance on a fiduciary’s duties regarding alternative asset investments and to clarify its new position. The Labor Secretary will consult with the Treasury Secretary, the Securities and Exchange Commission (SEC), and other federal regulators to determine whether these agencies need to tweak their own rules to match Labor’s.
The second order prohibits “politicized or unlawful debanking.” Federal regulators would be barred from promoting “policies and practices that allow financial institutions to deny or restrict services based on political beliefs, religious beliefs, or lawful business activities, ensuring fair access to banking for all Americans.”
Federal banking regulators are ordered to purge any reference to “reputational risk” from their documents, while the Small Business Administration has been told to compel “all financial institutions subject to its jurisdiction to make reasonable efforts to reinstate clients and potential clients previously denied services due to unlawful debanking.”
Various federal agencies and officials will align to “develop a comprehensive strategy to further combat politicized or unlawful debanking activities, including potential legislative or regulatory solutions.”
But the most significant part of this order tells banking regulators “to review financial institutions for past or current policies encouraging politicized or unlawful debanking and take remedial actions, including fines or consent decrees.” Similarly, regulators will “review supervisory and complaint data for instances of unlawful debanking based on religion and refer such cases to the Attorney General.”
The fact sheet cites some real-world debanking incidents, primarily involving conservative groups, but also lists Trump’s own struggles (more on that below) and notes that “the digital assets industry has also been the target of unfair debanking activities.”
Revenge of the Debanked
The debanking EO was rumored to be in the works in a report by the Wall Street Journal earlier this week. Changpeng ‘CZ’ Zhao, founder of the Binance digital asset exchange, tweeted his approval of the rumor, saying “it used to be that corresponding banks in the US block transactions involving crypto (fiat for buying crypto). This opens banking for crypto internationally.”
The order’s genesis reportedly sprang from a decision by Bank of America (BoA) (NASDAQ: BAC) to close accounts linked to a Christian group operating in Uganda. While the group reportedly believes BoA acted out of hostility towards their religious beliefs, BoA maintains that it simply doesn’t serve small businesses operating beyond America’s borders.
The New York Post later reported that BoA and JPMorgan (NASDAQ: JPM) had both debanked President Trump in the aftermath of the January 6, 2021 attack on the Capitol in Washington. Sources at the banks claimed that banking regulators under President Biden warned banks that continued dealings with Trump could violate rules prohibiting them from dealing with customers that present a reputational risk.
A JPMorgan spokesperson didn’t deny the Post’s reporting on the reputation risk issue, but said it doesn’t “close accounts for political reasons, and we agree with President Trump that regulatory change is desperately needed.” A BoA spokesperson declined to respond.
The next day, Trump phoned into CNBC’s Squawk Box and was asked about the reports. Trump said “I had many, many accounts loaded up with cash … and they told me, ‘I’m sorry, sir, we can’t have you. You have 20 days to get out.’”
Trump claimed BoA CEO Brian Moynihan “was kissing my ass when I was president, and when I called him after I was president to deposit a billion dollars plus and a lot of other things, more importantly to open accounts … And he said, ‘We can’t do it.’”
Trump said he “ended up going to small banks all over the place. I mean, I was putting $10 million here, $10 million there … it’s lucky I even had them. They were doing me a favor. And that’s because the banks discriminated against me very badly.”
Trump said banks “are not afraid of anything but a regulator. Their regulators and their wives.” Trump claimed that Biden’s team “told the banking regulators ‘do everything you can to destroy Trump.’ And that’s what they did.”
Later that day, CNBC asked Moynihan about Trump’s claims. Moynihan said, “the president’s after the right thing … it’s right to go look at these rules, because … they are causing decisions to be made that can be looked at in retrospect and made differently.”
Asked whether he feared any “retribution” from Trump, Moynihan said “we’ll get through this and get some rules written, and then we can follow them … we’ve got to stop the regulators behind the scenes whipsawing back and forth and forcing companies like ours to make decisions that Congress hasn’t passed or [Trump] hasn’t passed.”
In January, Trump spoke via satellite at the World Economic Forum (WEF), with Moynihan in the audience. Trump addressed Moynihan directly, saying, “I hope you start opening your bank to conservatives. Because many conservatives complain that the banks are not allowing them to do business within the bank.” Trump also name-checked JPMorgan CEO Jamie Dimon, saying, “you’re going to open your banks to conservatives, because what you’re doing is wrong.”
Flogging a dead horse?
The ’reputational risk’ issue has largely been addressed by the new Trump-appointed leaders of America’s banking regulators. The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Comptroller of the Currency (OCC) all rescinded Biden-era guidance on the risk issue this spring.
Republicans in both the House and Senate subsequently introduced bills to codify regulators’ inability to cite reputational risk as a justification for either denying or withdrawing services.
The crypto sector claimed to have been the principal target of this reputational guidance, a campaign the sector dubbed Operation Choke Point 2.0. Last week, Alex Rampell, a general partner at tech-focused venture capital group Andreessen Horowitz (a16z), issued a warning that the 3.0 version of this campaign was now being waged by the banks themselves without any government pressure.
Rampell was referring to the recent move by JPM to impose fees on data aggregators like Plaid that serve as bank-to-fintech bridges. Rampell called this a “callous and manipulative attempt to kill competition and consumer choice,” leaving out the bit about how the aggregators would have passed on those fees to many fintechs in which a16z holds a stake.
But two days before Rampell’s post was published, the Consumer Financial Protection Bureau (CFPB) reversed its stance in a legal suit that would have permitted JPM to proceed with its fee plan. That reversal followed a direct appeal to Trump by a coalition of data aggregators, fintechs and crypto operators.
So a16z’s warning came a little late. Rampell’s intention appears to have been to deter other banks from even considering going down the same road. As Rampell put it, “[i]f [JPM] get away with this, every bank will follow.”
Rampell may have also been lobbying for faster approval of the growing number of crypto firms filing applications for national bank charters. As he put it, “[i]n a perfect world, consumers would vote with their wallets. But every bank will likely do this, and getting a new banking charter takes years. Many banks have hostages, not customers.”
SEC on liquid staking: have at it
On August 5, the SEC’s Division of Corporation Finance issued new nonbinding guidance that ‘liquid staking’ activities “do not involve the offer and sale of securities” unless the staked tokens “are part of or subject to an investment contract.”
As such, “providers involved in the process of minting, issuing and redeeming Staking Receipt Tokens … as well as persons involved in secondary market offers and sales of Staking Receipt Tokens, do not need to register those transactions with the Commission under the Securities Act.”Liquid staking involves users of a proof-of-stake blockchain staking the network’s native tokens in exchange for newly minted tokens—the aforementioned Staking Receipt Tokens—which are tokenized versions of the assets being staked. The idea is to free up liquidity for decentralized finance (DeFi) platforms while ensuring the smooth operation of a network’s consensus mechanism.
The SEC’s previous leadership targeted a number of companies involved in liquid staking activities, but that was then, and this is now. Notably, the SEC’s announcement came just one week after it received a joint submission from several DeFi companies and their VC backers urging the regulator “to approve frameworks that support [liquid staking tokens] integration into traditional financial products.” (In this case, the products were exchange-traded funds (ETFs) based on SOL tokens.)
The digital asset sector’s overall reaction to the news can only be described as effusive, although caution has been urged given the fact that the division’s statement doesn’t carry any legal weight until it’s formally adopted by the SEC.
The statement follows last week’s release of the SEC’s blueprint for Project Crypto, which heralds a dramatic relaxation of the rules regarding nearly everything to do with digital assets.
Matt Hougan, chief investment officer of ETF provider Bitwise (one of the signers of that SOL ETF submission), issued a note on August 5 calling SEC chairman Paul Atkins’ Project Crypto statement “the most complete vision of how crypto can reshape financial markets that I’ve read … It’s like the chairman of the SEC took all the best ideas crypto supporters have been promoting for the past decade and packaged them in a single speech, along with details on how the SEC can actually make them happen.”
Not everyone is celebrating this trend. SEC commissioner Caroline Crenshaw—the lone remaining Democrat-appointed commissioner—issued a sharp-tongued rebuttal to the liquid staking announcement. Crenshaw said the SEC’s attempts at providing “greater clarity” had instead “only muddie[d] the waters.”
Not mincing words, Crenshaw said the SEC’s statement “stacks factual assumption on top of factual assumption on top of factual assumption, resulting in a wobbly wall of facts without an anchor in industry reality.” The statement’s “series of definitive declarations about how liquid staking works … might not reflect prevailing conditions on the ground.”
Amanda Fischer, who was chief of staff to former SEC chair Gary Gensler, tweeted her opinion that the SEC’s liquid staking stance is like blessing “the same type of rehypothecation that cratered Lehman Brothers.”
Challenged on this stance by Christopher Perkins—a former Lehman exec and current president of investment firm Coinfund—Fischer retorted that “[s]aying that crypto is not like Lehman Brothers because you were active in the collapse of Lehman Brothers is not the credential you think it is.”
Tornado Cash dev wins some, loses some
On August 4, SEC Commissioner Hester ‘Crypto Mom’ Peirce gave a speech to the Science of Blockchain Conference in which she defended the rights of DeFi developers who promote “financial privacy in the digital age.”
Emphasizing that this was her own opinion, not an official SEC policy statement, Peirce cited coin mixers as helping people ensure privacy in their online activities. As such, “government must guard jealously the ability of Americans to use them freely … People use these tools for bad purposes too, but treating technology as the villain will impinge on legitimate users’ privacy.”
Two days after Peirce’s speech, the jury in the U.S. federal trial of Tornado Cash (TC) co-founder Roman Storm returned a verdict. Storm was found guilty of conspiracy to operate an unlicensed money transmitting business, but the jury failed to reach a unanimous verdict on the more serious charges of money laundering and aiding the violation of U.S. economic sanctions.
Storm and TC co-founder Roman Semenov (who remains at large) were charged in 2023 for allegedly contributing to the laundering of over $1 billion worth of the Ethereum network’s ETH token. Prosecutors alleged that much of the ETH washed clean via TC was the proceeds of crime, including tokens stolen by North Korea’s infamous Lazarus Group of hackers.
Storm’s defense echoed the longstanding arguments of DeFi developers everywhere that they simply design software and don’t take custody of the tokens that pass through their protocols, therefore they’re not responsible for how their tools are used or by whom.
Storm, who has yet to comment on the verdicts via his X account, offered a brief post-verdict aside to Crypto in America journalist Eleanor Terrett on his way out of the courthouse. Storm reportedly said the fact that the jury deadlocked on two charges was “a big win. The 1960 charge is bullshit and we’re going to fight it all the way.” (Section 1960 is the federal law prohibiting money transmitting without a state or federal license.)
Prosecutors have not said whether they’ll choose to retry Storm on the laundering/sanctions charges. Storm could face five years in prison for the money transmitting conviction, but was allowed to remain free pending sentencing (the date for which has not been set).
Reaction from the DeFi community to Storm’s verdicts was a mix of relief and outrage. The DeFi Education Fund tweeted their disappointment and pledged to “continue to support Storm as he appeals” the 1960 conviction. The Blockchain Association tweeted that the verdict “sets a dangerous precedent for open-source software developers. We urge him to appeal.”
But Storm’s appeal hopes suffered a blow last week, as two developers behind the rival Samourai Wallet mixer pled guilty to charges of conspiracy to operate an unlicensed money transmitting business in exchange for prosecutors dropping money laundering charges. The pair agreed not to challenge any prison sentence under five years and agreed to forfeit $237 million.
That said, there’s a good possibility that Trump could pardon Storm even before his appeal gets underway. Trump’s new affinity for everything crypto has already seen him pardon the BitMEX exchange and Silk Road founder Ross Ulbricht.
Paxos makes nice with New York
On August 7, the New York Department of Financial Services (NYDFS) announced that it had reached a $48.5 million settlement with Paxos Trust. The settlement stems from the ill-fated partnership between Paxos and Binance in issuing the BUSD stablecoin.
The NYDFS said Paxos had agreed to pay a $26.5 million penalty for its “failure to conduct sufficient due diligence of its former partner, Binance, and systemic failures in Paxos’s anti-money laundering program.” Paxos also agreed to invest $22 million “to improve its compliance program and remediate deficiencies.”
The NYDFS said Paxos “did not have appropriate controls in place to effectively monitor for significant illicit activity occurring at or through Binance, and failed to escalate red flags to Paxos’s senior management and its Board.”
Binance aside, the NYDFS also found that Paxos “operated a deficient compliance program for years.” Customers suspected of illicit coordinated activity “were able to open multiple accounts and remain undetected.” Paxos also failed to detect “obvious patterns of money laundering, thus exacerbating its onboarding compliance deficiencies.”
NYDFS Superintendent Adrienne Harris said “regulated entities must maintain appropriate risk management frameworks that correspond to their business risks, which includes relationships with business partners and third-party vendors.”
Paxos issued a statement saying “the compliance issues discussed are historical issues that were identified over two and half years ago and have since been fully remediated. These matters had no impact on customer accounts and there was no consumer harm.”
Paxos stopped minting new BUSD in 2023 after the SEC sent the company a Wells notice, indicating that an enforcement action against Paxos was imminent due to the SEC viewing BUSD as an unregistered security. The NYDFS later made similar allegations regarding BUSD’s status.
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