The opinion editorial below was written by Michael Handelsman for Kelman.Law.
This week brought a legal challenge to the federal chartering route used by crypto businesses, new U.S. sanctions targeting a network that uses digital assets, and renewed congressional scrutiny of Tether. In Europe, regulators proposed expanding MiCA’s reach, while the United Kingdom opened its crypto authorization application window.
For businesses, the immediate task is to distinguish developments requiring action now from those that could reshape future obligations. A sanctions designation, a proposed regulatory amendment, and a newly filed lawsuit carry very different consequences.
1. Community Banks Challenge the OCC’s Crypto Trust Bank Framework
On October 2, the Independent Community Bankers of America filed suit against the Office of the Comptroller of the Currency in federal court in Washington, D.C. Its complaint challenges the OCC’s March 2026 National Bank Chartering rule, Interpretive Letter 1176, and Protego’s charter approval. ICBA argues that the agency exceeded its statutory authority by permitting national trust banks that neither accept deposits nor operate within the fiduciary limitations ICBA contends federal law requires.
ICBA seeks to have those actions set aside and to prevent further charter approvals under the challenged rule and interpretation. These are the plaintiff’s allegations and requested remedies; filing the complaint does not itself invalidate the framework.
For crypto custodians and other businesses considering a national trust charter, the practical concern is planning uncertainty. Charter-dependent financing, product launches, and commercial agreements should account for the possibility of litigation affecting the proposed regulatory route. Businesses should also distinguish a conditional approval from permission to commence particular activities when describing their status to customers and counterparties.
2. Treasury Targets the A7 Network, Including Its Digital-Asset Infrastructure
On October 1, Treasury announced coordinated action against the A7 Network, which it describes as a sanctions-evasion network connected to Russia and used by Iran. OFAC designated the network as a significant transnational criminal organization. Separately, FinCEN proposed restrictions on funds transfers involving its sub-agents and issued an alert to financial institutions. Treasury identifies the ruble-backed A7A5 token as part of the network’s infrastructure.
The distinction between these actions matters. The OFAC designation carries blocking consequences under applicable sanctions rules. FinCEN’s proposed transfer prohibition remains a proposal; it should not be described as an already effective final rule.
Treasury says the network uses intermediary companies and misleading trade documentation to disguise payments. Its accompanying FinCEN alert gives compliance teams a source for reviewing suspicious activity involving the network.
For exchanges, payment businesses, and OTC desks, our practical takeaway is to review exposure beyond token names alone. Counterparty ownership, intermediaries, transaction purposes, and supporting commercial documents can be critical. A business should assess whether its escalation procedures can connect suspicious activity across both blockchain transactions and conventional payment channels.
3. Senate Investigators Put Tether’s Sanctions Controls Under Renewed Scrutiny
On September 28, Senator Richard Blumenthal released a report by Democratic investigators on the Senate Permanent Subcommittee on Investigations. The investigators examined 846 wallets associated with Iran and its regional proxies that had been sanctioned or targeted for seizure. The report criticized Tether’s controls, and Blumenthal called on Treasury and the Justice Department to investigate potential violations. These are congressional investigative findings and allegations, rather than a judicial determination of liability.
In its own September 28 statement, Tether emphasized its cooperation with authorities and said actions involving USDT had resulted in approximately $550 million in Iran-linked assets being frozen during 2026. That figure is Tether’s account of its enforcement cooperation.
For businesses using stablecoins, the operational lesson extends beyond the issuer’s compliance program. Firms should understand their own exposure to counterparties, wallet restrictions, and interruptions in access to funds. Customer agreements and internal procedures should explain how a suspected sanctions issue is escalated, what records are preserved, and who can authorize a response. Reliance on an issuer’s ability to freeze tokens should not substitute for a business’s own compliance assessment.
4. ESMA Proposes Broader MiCA Rules for DeFi Access and Stronger Enforcement
On September 30, ESMA published its recommendations for the European Commission’s MiCA review. The package proposes stronger supervisory powers, tighter marketing standards, clearer treatment of noncompliant stablecoins, and targeted requirements for staking, lending, and borrowing. These are recommendations for changes to the framework, not newly enacted obligations.
A particularly consequential part of the underlying response concerns businesses that give customers access to DeFi protocols. ESMA proposes a regulated service covering certain intermediary activities, including technical interfaces and transaction routing. It also recognizes that open-source development, self-custody, automated smart contracts, and permissionless infrastructure should not automatically constitute regulated intermediation.
For founders, the key planning issue is the role their business actually performs. A platform that selects protocols, routes customer activity, or manages conflicts presents different questions from software published without those functions. Our reading is that ESMA wants obligations calibrated to the intermediary’s role and control. Businesses developing European products should document those distinctions now, alongside protocol-selection policies, customer disclosures, and the commercial relationships behind their interfaces.
5. The UK Opens Its Crypto Authorization Application Window
On September 30, the Financial Conduct Authority began accepting applications under the UK’s new crypto regulatory regime. The application period runs through February 28, 2027, ahead of the regime’s scheduled commencement on October 25, 2027. The new development this week is the opening of that application window, following the rules and guidance published earlier this year.
The FCA makes clear that authorization is not automatic. Its preparation guidance addresses both firms already authorized under the Financial Services and Markets Act and firms registered under the money-laundering regulations. Depending on their activities, businesses will need a new authorization or a variation of existing permissions.
For companies serving UK customers, the immediate work is to map their products against the new regulated activities and identify gaps in governance, safeguarding, financial resources, and compliance. The FCA expects timely applications to support an orderly transition, but an application still needs to demonstrate that the firm meets its standards. A board-approved preparation plan, with clear responsibilities and realistic implementation dates, can help prevent licensing work from becoming a last-minute threat to business continuity.
Businesses assessing how these developments affect their regulatory strategy, commercial arrangements, or disputes can contact Kelman PLLC to discuss their circumstances.
Attorney Advertising. This article provides general information, not legal advice. Contacting the firm does not establish an attorney-client relationship.
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