Trump’s focus on cartels highlights new risks for digital assets
Opinion by: Genny Ngai and Will Roth of Morrison Cohen LLP
Since taking office, the Trump administration has designated several drug and violent cartels as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs). US President Donald Trump has also called for the “total elimination” of these cartels and the like. These executive directives are not good developments for the cryptocurrency industry. On their face, these mandates appear focused only on criminal cartels. Make no mistake: These executive actions will cause unforeseen collateral damage to the digital asset community. Crypto actors, including software developers and investors, may very well get caught in the crosshairs of aggressive anti-terrorism prosecutions and follow-on civil lawsuits.
Increased threat of criminal anti-terrorism investigations
The biggest threat stemming from Trump’s executive order on cartels is the Department of Justice (DOJ). Almost immediately after President Trump called for the designation of cartels as terrorists, the DOJ issued a memo directing federal prosecutors to use “the most serious and broad charges,” including anti-terrorism charges, against cartels and transnational criminal organizations.
This is a new and serious development for prosecutors. Now that cartels are designated as terrorist organizations, prosecutors can go beyond the traditional drug and money-laundering statutes and rely on criminal anti-terrorism statutes like 18 U.S.C. § 2339B — the material-support statute — to investigate cartels and anyone who they believe “knowingly provides material support or resources” to the designated cartels.
Why should the crypto industry be concerned with these developments? Because “material support or resources” is not just limited to providing physical weapons to terrorists. “Material support or resources” is broadly defined as “any property, tangible or intangible, or service.” Anyone who knowingly provides anything of value to a designated cartel could now conceivably violate § 2339B.
Even though cryptocurrency platforms are not financial institutions and never take custody of users’ assets, aggressive prosecutors may take the hardline view that software developers who design crypto platforms — and those who fund these protocols — are providing “material support or resources” to terrorists and launch harmful investigations against them.
This is not some abstract possibility. The government has already demonstrated a willingness to take this aggressive position against the crypto industry. For example, the DOJ indicted the developers of the blockchain-based software protocol Tornado Cash on money laundering and sanction charges and accused them of operating a large-scale money laundering operation that laundered at least $1 billion in criminal proceeds for cybercriminals, including a sanctioned North Korean hacking group.
Recent: Crypto crime in 2024 likely exceeded $51B, far higher than reported: Chainalysis
Moreover, the government already believes that cartels use cryptocurrency to launder drug proceeds and has brought numerous cases charging individuals for laundering drug proceeds through cryptocurrency on behalf of Mexican and Colombian drug cartels. TRM Labs, a blockchain intelligence company that helps detect crypto crime, has even identified how the Sinaloa drug cartel — a recently designated FTO/SDGT — has used cryptocurrency platforms to launder drug proceeds.
The digital asset community faces real risks here. Putting aside the reputational damage and costs that come from defending criminal anti-terrorism investigations, violations of § 2339B impose a statutory maximum term of imprisonment of 20 years (or life if a death occurred) and monetary penalties. Anti-terrorism statutes also have extraterritorial reach, so crypto companies outside the US are not immune to investigation or prosecution.
Civil anti-terrorism lawsuits will escalate
The designation of cartels as FTOs/SDGTs will also increase the rate at which crypto companies will be sued under the Anti-Terrorism Act (ATA). Under the ATA, private citizens, or their representatives, can sue terrorists for their injuries, and anyone “who aids and abets, by knowingly providing substantial assistance, or who conspires with the person who committed such an act of international terrorism.”
Aggressive plaintiffs’ counsel have already relied on the ATA to sue cryptocurrency companies in court. After Binance and its founder pled guilty to criminal charges in late 2023, US victims of the Oct. 7 Hamas attack in Israel sued Binance and its founder under the ATA, alleging that the defendants knowingly provided a “mechanism for Hamas and other terrorist groups to raise funds and transact illicit business in support of terrorist activities” and that Binance processed nearly $60 million in crypto transactions for these terrorists. The defendants filed a motion to dismiss the complaint, which was granted in part and denied in part. For now, the district court permits the Ranaan plaintiffs to proceed against Binance with their aiding-and-abetting theory. Crypto companies should expect to see more ATA lawsuits now that drug cartels are on the official terrorist list.
Vigilance is key
Crypto companies may think that Trump’s war against cartels has nothing to do with them. The reality is, however, that the effects of this war will be widespread, and crypto companies may be unwittingly drawn into the crossfire. Now is not the time for the digital asset community to relax internal compliance measures. With anti-terrorism statutes in play, crypto companies must ensure that transactions with all FTOs/SDGTs are identified and blocked, monitor for new terrorist designations, and understand areas of new geographical risks.
Opinion by: Genny Ngai and Will Roth of Morrison Cohen LLP.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
PayPal says the US Securities and Exchange Commission has abandoned its investigation into the payment giant’s US-dollar stablecoin.
PayPal said in an April 29 regulatory filing that the SEC concluded its investigation into PayPal USD (PYUSD) and wouldn’t be taking any action.
The company said it received a subpoena from the SEC’s Division of Enforcement over its stablecoin in November 2023.
“The subpoena requests the production of documents. We are cooperating with the SEC in connection with this request,” PayPal stated at the time.
In its latest filing, the firm said the SEC notified it in February that the agency “was closing this inquiry without enforcement action.”
PayPal has said its stablecoin is 100% redeemable for US dollars and “fully backed” by dollar deposits, including short-term treasuries and cash equivalents.
However, the stablecoin has struggled to gain momentum in a crowded market dominated by rivals Tether and Circle. PYUSD has a market capitalization of just $880 million, less than 1% of Tether’s (USDT) $148.5 billion.
PayPal’s stablecoin has seen better growth this year with a 75% increase in PYUSD circulating supply since the beginning of 2025, according to CoinGecko. It remains down 14% from its peak supply of just over $1 billion in August 2024.
Earnings on PYUSD, Coinbase partnership
That growth could be bolstered by a company announcement on April 23 introducing rewards for PYUSD in a new loyalty offering that will enable US users to earn 3.7% annually for holding the asset on the platform.
Meanwhile, on April 24, PayPal announced a partnership with Coinbase to increase the adoption of PYUSD.
“We are excited to drive new, exciting, and innovative use cases together with Coinbase and the entire cryptocurrency community, putting PYUSD at the center,” said Alex Chriss, PayPal President and CEO.
Related: PayPal to offer 3.7% yield on stablecoin balances: Report
The payments giant also reported robust first-quarter earnings and the completion of significant share repurchase activities.
The firm beat Wall Street estimates, earning $1.33 per share in the first quarter, topping analyst expectations of $1.16. Revenue rose 1% from a year before to $7.8 billion.
Magazine: Bitcoin $100K hopes on ice, SBF’s mysterious prison move: Hodler’s Digest
Asset manager BlackRock has filed to create digital ledger technology shares from one of the firm’s money market funds, which will leverage blockchain technology to maintain a mirror record of share ownership for investors.
The DLT shares will track BlackRock’s BLF Treasury Trust Fund (TTTXX), which may only be purchased from BlackRock Advisors and The Bank of New York Mellon (BNY), the firm said in its April 29 Form N-1A filing with the Securities and Exchange Commission.
The money market fund holds over $150 million worth of assets, invested almost entirely in US Treasury bills and cash.
BlackRock said that the shares “are expected to be purchased and held through BNY, which intends to use blockchain technology to maintain a mirror record of share ownership for its customers.”
Unlike the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), DLT shares won’t be tokenized but will instead be used as a transparency tool to verify ownership.
BlackRock will continue to maintain traditional book-entry records as the official ownership ledger.
BlackRock didn’t propose a ticker or set a management fee for the DLT shares in its filing.
A minimum initial investment of $3 million worth of DLT is required for institutions seeking to purchase the digital shares.
BlackRock follows Fidelity’s March 21 filing to list an Ethereum-based OnChain share class, which seeks to track the Fidelity Treasury Digital Fund (FYHXX) — an $80 million fund consisting almost entirely of US Treasury bills.
While the OnChain share class filing is pending regulatory approval, Fidelity expects it to take effect on May 30.
Wall Street heavyweights continue to explore blockchain use cases
Asset managers have increasingly turned to blockchain to tokenize Treasury bills, bonds and private credit over the past few years.
Related: BlackRock Bitcoin ETF buys $970M in BTC as inflows surge, boost market
The treasury tokenization market is currently valued at $6.16 billion, led by BlackRock’s BUIDL at $2.55 billion, while the Franklin Templeton-issued Franklin OnChain US Government Money Fund (BENJI) secures over $700 million worth of real-world assets, according to rwa.xyz.
Ethereum remains the chain of choice for tokenizing treasury assets, and currently houses over $4.55 billion worth, while the Stellar network and Solana round out the top three at $474.9 million and $274.5 million, respectively.
The potential of RWA tokenization has also been championed by BlackRock’s CEO, Larry Fink, who believes the technology could revolutionize investing.
Magazine: Ethereum is destroying the competition in the $16.1T TradFi tokenization race
The US Treasury Department’s Office of Foreign Assets Control can’t restore or reimpose sanctions against the crypto mixing service Tornado Cash, a US federal court has ruled.
Austin federal court judge Robert Pitman said in an April 28 judgment that OFAC’s sanctions on Tornado Cash were unlawful and that the agency was “permanently enjoined from enforcing” sanctions.
Tornado Cash users led by Joseph Van Loon had sued the Treasury, arguing that OFAC’s addition of the platform’s smart contract addresses to its Specially Designated Nationals and Blocked Persons (SDN) list was “not in accordance with law.”
OFAC had sanctioned Tornado Cash in August 2022, accusing the protocol of helping launder crypto stolen by the North Korean hacking collective, the Lazarus Group.
The agency dropped the platform from the sanctions list on March 21 and argued that the matter was “moot” after a court ruled in favor of Tornado Cash in January.
This latest amended ruling prevents OFAC from re-sanctioning Tornado Cash or putting it back on the blacklist.
Initially, the court denied a motion for partial summary judgment and granted in favour of the Treasury. However, the Fifth Circuit reversed the decision and instructed the lower court to grant partial summary judgment to the plaintiffs, which led to the sanctions being revoked.
In March, the Treasury argued there was no need for a final court judgment in the lawsuit.
Crypto body petitions White House over Tornado Cash
On April 28, the DeFi Education Fund petitioned White House crypto czar David Sacks to have prosecutors drop charges against Tornado Cash co-founder Roman Storm.
Related: Samourai Wallet, feds ask for time to mull dropping crypto mixer case
Storm was charged in August 2023 with helping launder over $1 billion in crypto through the protocol, and his trial is still set for July.
The group said that the Department of Justice was attempting to hold software developers criminally liable for how others use their code, which they argued was “not only absurd in principle, but it sets a precedent that potentially chills all crypto development in the United States.”
Magazine: Bitcoin $100K hopes on ice, SBF’s mysterious prison move: Hodler’s Digest
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business3 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway