October 15, 2025

Clients, Friends, and Associates:

As we head into the fourth quarter of what has already been an exciting year in the digital asset space, we would like to highlight several recent industry and firm developments that took place during the past quarter. This update includes notable developments in the digital asset regulatory environment, including proposed new legislation, agency rulemaking, and changes in the enforcement priorities of regulators, as well as some items that affect the securities and investment management industries more broadly. As always, our intention is to present an informative, succinct overview of topics we view as top of mind for us and our clients. We remain available should you have any questions on any of these items or related matters.

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CFM Items

CoinAlts Fund Symposium.   Cole-Frieman & Mallon LLP, along with industry leaders MG Stover, Harneys, and KPMG, is a premier sponsor of the CoinAlts Fund Symposium. This annual event, being held at the Four Seasons Hotel in San Francisco on October 29, 2025, is the anchor event of SF Fund Week 2025. It brings together the digital asset community to address investment, legal, and operational issues relevant to private fund managers. It is a must-attend gathering for industry professionals, providing unparalleled insights and networking opportunities. Join us for expert panels, top-notch speakers, and the chance to stay ahead of the curve in this rapidly evolving industry. More information is available at https://coinalts.xyz/. 

CFM People. We are pleased to introduce the newest members of our dedicated team at CFM. Devan Musser has joined as a Senior Associate, and JJ Young has joined as an Associate. Former Summer Associate Alisha Parikh has returned as a Law Clerk, and we are also pleased to welcome Administrative Assistant Agustin De Jesus. Please join us in extending a warm welcome to all

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SEC Matters

SEC Issues No-Action Letter Regarding State Trust Companies as Qualified Custodians for Digital Assets. On September 30, 2025, the Securities and Exchange Commission’s (“SEC”) Division of Investment Management issued a no-action letter to Simpson Thacher & Bartlett LLP stating that it would not recommend enforcement action under Section 206(4) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), or Sections 17(f) and 26(a) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), if a registered investment adviser or registered fund treats a State Trust Company as a “bank” for purposes of acting as a qualified custodian for crypto assets and related cash, provided certain conditions are met. The letter requires advisers and funds to (i) conduct initial and annual due diligence to confirm the trust company is authorized by its state banking regulator to provide custody services; (ii) review the company’s written policies and procedures for safeguarding crypto assets, including private-key management and cybersecurity; (iii) obtain and evaluate the company’s audited financial statements and internal-control reports (e.g., SOC-1 or SOC-2); (iv) enter into a written custodial agreement prohibiting lending, pledging, or rehypothecation of assets; (v) ensure that client assets are fully segregated from the custodian’s own assets; and (vi) provide appropriate disclosure to clients or fund boards and determine that the arrangement is in their best interest. The relief does not extend to exempt reporting or state-registered advisers and does not change the definition of a “qualified custodian.” The staff noted that its position is limited to the facts presented and does not have the force of law. The letter provides long-awaited clarity for registered advisers on using state-chartered trust companies to custody digital assets.

SEC Extends Compliance Date for the New Form PF Amendments (Again). In our 2025 Q1 Quarterly Update, we reported that the SEC extended the compliance date for Form PF amendments from March 12, 2025, to June 12, 2025. On June 11, 2025, the SEC and the Commodity Futures Trading Commission (“CFTC”) voted to extend the compliance date from June 12, 2025, to October 1, 2025. Both agencies voted to extend the compliance date to allow filers more time to test compliance with the Form PF amendments. While the extension eases immediate pressure, managers who wait too long risk running into compliance challenges when the deadline arrives. Early engagement with counsel and fund administrators will help mitigate last-minute compliance challenges.

SEC Releases a Statement on Liquid Staking Activities. On August 5, 2025, the SEC’s Division of Corporation Finance issued a staff statement addressing certain liquid staking arrangements. Of note, the Division stated that it does not view an offer or sale of securities having taken place under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under an arrangement where depositors receive transferable “staking receipt tokens” tied to their staked assets and rewards, provided that the provider’s role is limited to administrative functions. The Division’s stated rationale is that tokens derive their value from the underlying protocol rather than from the provider’s efforts. The statement applies only to this narrow fact pattern: arrangements where providers take on more active roles (such as guaranteeing returns or directing staking decisions) could still raise securities law concerns and trigger regulatory scrutiny.

SEC Launches “Project Crypto.” On July 31, 2025, SEC Chairman Paul S. Atkins announced the SEC’s adoption of a new initiative to modernize digital asset regulation and strengthen U.S. leadership in blockchain markets. Marking a shift from enforcement toward innovation, Atkins stated that most crypto assets are not securities and outlined five priorities: (i) clear token classification; (ii) flexible custody (including self-custody); (iii) unified licensing for “super-apps”; (iv) recognition of DeFi and on-chain settlement; and (v) innovation exemptions for new business models. Atkins also cited initial coin offerings (“ICOs”) and airdrops as legitimate fundraising tools under the SEC’s Project Crypto plan to publish bright-line guidance and propose exemptions/safe harbors. Project Crypto, which builds on the White House’s digital asset report (discussed below), signals a major pivot in U.S. policy. The SEC has invited industry participants to engage in the forthcoming rulemaking process.

SEC Updates Disclosure Standards for Crypto Asset Exchange-Traded Products (“ETPs”). On July 1, 2025, the SEC’s Division of Corporation Finance released a staff statement addressing the application of the Securities Act and the Exchange Act to the registration and offering of crypto asset ETPs, generally structured as trusts holding spot crypto assets or related derivatives. The statement sets out disclosure expectations across a range of areas, including the prospectus cover page and summary, management and conflict of interest disclosures, and financial statements. Issuers are advised to tailor disclosures to the specifics of their product and to provide a clear, comprehensive discussion of risks. The SEC’s guidance makes clear that ETPs extending beyond spot Bitcoin or Ethereum will face heightened scrutiny, highlighting the need for issuers to ensure disclosures are thorough and product-specific.

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CFTC Matters

CFTC Issues No-Action Letter on Event Contracts. On July 22, 2025, the CFTC’s Divisions of Market Oversight and Clearing and Risk issued a no-action letter granting the Chicago Mercantile Exchange (“CME”) relief from certain swap reporting and recordkeeping rules for its binary options contracts. While these contracts meet the statutory definition of “swaps,” CME argued that they are standardized, exchange-traded products with premium-style margining that limit systemic risk. The no-action relief is conditioned on CME contracts being fully margined, cleared solely through CME’s Derivatives Clearing Organization, publicly reporting trade data, and maintaining full records.
 
CFTC Regulators’ Roundtable is held in London. On July 14, 2025, the CFTC held its third annual international Emergent Technologies Roundtable in London, focused on the opportunities and risks posed by new technologies. Discussions highlighted how AI can enhance fraud detection, improve efficiency, and expand access, but also underscored the need for strong governance, responsible design, and coordination among global regulators to balance innovation with stability, oversight, and security.

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Digital Asset Matters

Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”) Signed into Legislation. On July 18, 2025, President Trump signed the GENIUS Act, marking the United States’ first federal and major framework for stablecoins. The GENIUS Act limits issuance to approved banks, Office of the Comptroller of the Currency (OCC)-qualified nonbanks, and state-licensed issuers. Stablecoins must be fully backed on a 1:1 basis and subject to monthly audits, with yield-bearing products prohibited. To protect consumers, the GENIUS Act gives stablecoin holders top priority in insolvency proceedings, ensuring their claims come before other creditors. The GENIUS Act also imposes strict AML and sanctions requirements. It takes effect in January 2027, with full compliance required by July 2028.

The Department of Justice’s (“DOJ”) Digital Asset Enforcement Focus Shift. On April 7, 2025, the Deputy Attorney General released a memo titled “Ending Regulation by Prosecution”. The memo expressed that the DOJ will no longer use criminal prosecutions to indirectly regulate digital assets, leaving regulatory classifications to the SEC, CFTC, and other agencies. The memo states that, going forward, DOJ enforcement will focus on traditional criminal conduct (e.g., fraud, money laundering, terrorist financing, narcotics, and organized crime), with a reduced focus on securities or commodities charges where the legal status of a digital asset is uncertain. The memo states that the DOJ will instead rely on alternative charges such as wire or mail fraud. The stated rationale for the shift in enforcement priorities is to give digital asset policy back to regulators while keeping the DOJ focused on prosecuting clear cases of fraud and other criminal conduct.
 
White House Issues Digital Asset Report. On July 30, 2025, the White House released its digital asset report, which sets out a new U.S. strategy for digital financial technology. The report marks a shift from a cautious regulatory posture toward a more pro-innovation, market-driven approach, treating digital assets as a strategic imperative for the U.S. Among the report’s priorities are clear rules for stablecoins, support for self-custody, technology-neutral oversight of banking and DeFi, modernized AML tools such as digital identity and blockchain analytics, and improved tax guidance. The report evinces an intent to rely on digital assets to promote investor confidence generally and to reinforce stability in U.S. markets.
 
The “Creating Legal Accountability and Responsibility in Technology for You” Act (“CLARITY Act”) Passes through U.S. House of Representatives (the “House”). On July 17, 2025, the CLARITY Act passed through the House. The bill defines a framework for trading digital commodities, designating the CFTC as the primary regulator of exchanges, brokers, and dealers, with limited jurisdiction retained by the SEC. To qualify for trading, digital commodities must either operate on a mature or decentralized blockchain or meet certain issuer reporting requirements. If enacted, the CLARITY Act would impose obligations for trade monitoring, recordkeeping, segregation of customer assets, and anti-money laundering compliance while providing limited exemptions from SEC registration for qualifying digital commodities and establishing rules for alternative trading systems, previously issued assets, and registration.

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Other Items

House Introduces Bill to Broaden the Definition of “Accredited Investor.” On May 13, 2025, the House proposed broadening the definition of an “accredited investor” by enabling individuals to qualify not only on the basis of income or net worth but also by passing a certification examination devised by the SEC. The exam must be designed to recognize individuals with financial sophistication, test for key areas like disclosure requirements, and be administered at no cost by a registered national securities association (e.g., FINRA) within 180 days of the establishment of the exam. The change would open pathways for more individuals to participate in private offerings, including private funds.
 
House Bill Seeks to Raise SEC Registration Threshold for Private Fund Advisers to Index to Inflation. On June 3, 2025, the House introduced legislation that would amend the Advisers Act to adjust the registration exemption threshold for certain investment advisers that manage private funds, aligning it with inflation. Specifically, the bill instructs that the exemption threshold be updated to reflect the change in the Consumer Price Index since the enactment of the Private Fund Investment Advisers Registration Act of 2010, with adjustment annually thereafter. This would ease regulatory burdens on smaller private fund advisers, allowing them to manage more assets without needing to register with the SEC.
 
Financial Crimes Enforcement Network (“FinCEN”) Delays AML Rule for Investment Advisers. On September 4, 2024, FinCEN finalized a rule extending the Bank Secrecy Act’s AML/CFT requirements to most registered investment advisers and exempt reporting advisers. The rule, initially set to take effect on January 1, 2026, requires advisers to adopt written AML programs, designate compliance officers, and conduct training and audits. It also mandates compliance with suspicious activity reporting, recordkeeping, and the “travel rule.” Under the rule, oversight would be delegated to the SEC, bringing advisers into alignment with the requirements applicable to other financial institutions. On July 21, 2025, FinCEN announced that implementation would be postponed until January 1, 2028. While it appears that regulators remain intent on bringing about relative conformity in the AML standards governing financial institutions, this postponement nonetheless offers some welcome breathing room for advisers to review existing policies, strengthen AML programs, and coordinate with service providers and consultants.
 
Executive Order Issued Regarding Alternative Assets for 401(k) Investors. On August 7, 2025, President Trump signed an Order directing the U.S. Department of Labor (“DOL”), in coordination with the SEC and the U.S. Department of the Treasury, to revisit ERISA rules and create potential fiduciary safe harbors that would reduce liability risk for plan sponsors including alternatives in 401(k) plans. The DOL has 180 days to issue new guidance. The policy aims to give retirement savers broader access to asset classes such as private equity, real estate, infrastructure, private credit, hedge funds, and digital assets, which have traditionally been limited to pensions and wealthy investors. Fiduciaries will still need to address challenges around fees, valuation, liquidity, and investor protection. The order has the potential to broaden access to a much larger pool of retirement capital for alternative managers, while also putting new pressure on fiduciaries to balance fees, liquidity, and investor safeguards.
 
Congress Moves to Broaden Investor Access to Qualifying Venture Capital Funds. On July 16, 2025, the House introduced a bill to amend the Investment Company Act, by altering the definition of a “Qualifying Venture Capital Fund.”  One key change is raising the permitted maximum number of investors in such funds from 250 to 2,000, increasing potential investor participation and potentially broadening capital access. The measure, currently under consideration by the House Financial Services Committee, is intended to open alternative investment structures to more participants and enhance capital flows to early-stage companies. The increased number of investors would also allow for greater flexibility in structuring such funds.
 
House Bill Proposes to Expand the Definition of “Qualifying Investments” for Venture Capital Advisers. On July 16, 2025, the House introduced a bill to revise the definition of “qualifying investment” under the Advisers Act for venture capital fund advisers. It would require the SEC, within 180 days of enactment, to include equity securities issued by qualifying portfolio companies (whether acquired directly or secondarily) and investments in other venture capital funds within that definition. This amendment would broaden the scope of investments that count toward a venture capital fund’s “qualified investment” portfolio, thus enabling more private funds to qualify as venture capital funds and more advisers to utilize related venture capital fund adviser exemptions.
 
The Hong Kong Monetary Authority (“HKMA”) Implements a Stablecoin Issuer Regulatory Regime. On July 29, 2025, the HKMA issued a series of documents putting into place a new regulatory framework for stablecoin issuers, which took effect August 1, 2025. The new framework requires issuers of fiat-referenced stablecoins that are offered to the Hong Kong public, or otherwise circulate in the market, to be licensed and to comply with requirements around governance, reserves, disclosure, and ongoing supervision.

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Compliance Calendar

As you plan your regulatory compliance timeline for the coming months, please keep the following dates in mind:

November 10, 2025

• Preliminary Statements for Annual Renewal Fees become available through E-Bill and can be accessed through FINRA Firm Gateway.

November 14, 2025

• Form 13F Quarterly Filing. Filing is for the calendar quarter that ended September 30, 2025, and must be submitted within 45 days of quarter end.
• Form 13G Quarterly Filing. Filing is for the calendar quarter that ended September 30, 2025, and must be submitted within 45 days of quarter end if there have been any material changes since the previous filing.
• CTA Form PR. Filing is for the calendar quarter that ended September 30, 2025, and must be submitted within 45 days of quarter end.

December 1, 2025

• Form PF for Large Hedge Fund Advisers. Filing is for the calendar quarter that ended September 30, 2025, and must be submitted within 60 days of quarter end.
• CPO-PQR Form. Filing is for the calendar quarter that ended September 30, 2025, and must be submitted within 60 days of quarter end.

December 8, 2025

• Annual Renewal Payments Due for Preliminary Statement issued in E-Bill for Registration/Notice Filings. Payment can be made through FINRA Firm Gateway.

Periodic

• Form D and Blue Sky Filings should be current.
• CPO/CTA Annual Questionnaires must be submitted annually, and promptly upon material information changes, through the NFA Annual Questionnaire system.
• Beneficial Ownership Reporting to FinCEN:
  • For reporting companies created in 2024, within 90 days of creation or registration.
  • For reporting companies created on or after January 1, 2025, within 30 days of creation or registration.
  • For updated reports, within 30 days after previously reported information changes.

Consult our complete Compliance Calendar for all 2025 critical dates as you plan your regulatory compliance timeline for the year.

Please contact us with any questions or assistance regarding compliance, registration, or planning issues on any of the above topics.

Sincerely,

Karl Cole-Frieman, Bart Mallon, John T. Araneo, Brett Bunnell, Garret Filler, Scott Kitchens, Kevin Leiske, Frank J. Martin, Lilly Palmer, Daniel M. Payne, David Rothschild, Bill Samuels, Tony Wise, and Alex Yastremski

Cole-Frieman & Mallon LLP (CFM) is a leading investment management law firm known for providing top-tier, innovative, and collaborative legal solutions for complex financial services matters. Headquartered in San Francisco, CFM services start-up investment managers, multibillion-dollar funds, and everything in between. The firm provides a full suite of legal services to private funds and their managers across a diverse range of asset classes, including fund formation, regulatory compliance, counterparty documentation (digital and traditional prime brokerage, ISDA, repo, and vendor agreements), employment and compensation matters, and routine business matters.  CFM is particularly well known for its pioneering work with digital asset funds and their managers. The firm’s corporate and intellectual property (IP) practice groups advise founders, management teams, and investors during all stages of a business’s lifecycle including fundraising, M&A, governance, IP, employment, tax, and regulatory compliance for service and product launches. CFM also publishes the prominent Hedge Fund Law Blog. For more information, please add us on LinkedIn, follow us on X, and visit us at colefrieman.com.