TRM Weekly Roundup | August 14, 2025

New tech, new rules, new risks — crypto compliance is rewriting the playbook.

In this week’s ✨Weekly Roundup✨, Ari Redbord, Angela Ang, and Isabella Chase take us from Beijing to Brussels to Brooklyn:

• China directs local firms to stop promoting stablecoins

• What’s the score? BIS posits idea for crypto AML compliance

• EBA: SupTech key to smarter supervision

• NYDFS issues consent order against Paxos for AML violations

• President Trump signs executive order on crypto 401(k) allocations and debanking

• Terra Luna founder Do Kwon pleads guilty to wire fraud in federal court

PS: don’t forget to check out the “🆕 at TRM” section for our latest announcements, TRM Talks drops, and company updates!

🇨🇳 China directs local firms to stop promoting stablecoins

According to media reports, Chinese regulators have told local brokers and other bodies to stop promoting stablecoins, “in a bid to curb a surge in interest in the digital currency among domestic investors.”

Citing unnamed sources familiar with the matter, Bloomberg reported that some leading brokerages and think tanks have received guidance from financial regulators in the past few weeks to cancel seminars and stop disseminating stablecoin research.

This comes on the back of Hong Kong's stablecoin regulatory regime, going live on August 1. The city, widely regarded as a regulatory sandbox for China, has repeatedly outlined its ambitions to become a crypto hub, including promoting the issuance of stablecoins. While crypto is banned in China, Hong Kong has a regulatory regime for virtual asset trading platforms, with 11 platforms having received licenses from the Securities and Futures Commission (SFC) to date.

🔢 What’s the score? BIS posits idea for crypto AML compliance

On Wednesday, the Bank for International Settlements – BIS released a bulletin titled, “An Approach to Anti-Money Laundering Compliance for Cryptoassets.” The authors argue that existing international AML standards for crypto assets try to impose intermediary-based principles from the fiat world onto crypto — but that approach has clear limits.

In a welcome shift, the BIS identifies multiple “contact points” within the crypto ecosystem where actors can perform AML checks, even in fully decentralized environments. They introduce the concept of an “AML compliance score” that “references the UTXOs for bitcoins or wallets for stablecoins” where the score tracks the full history of transactions and the wallets they have passed through, creating a “score” which denotes their risk. High scores would imply a “clean wallet” and a low score would imply that the wallet is higher risk to interact with. Thresholds could then be set by different entities or regulators for the “scores” they deem acceptable.

The authors also stress the need to define which actors should stop illicit flows — from users and service providers to clearing houses that convert stablecoins to fiat. Once defined, these actors could use AML scores to treat assets and wallets according to their historical risk.

Overall, the bulletin offers a constructive addition to the debate on AML in crypto. It challenges the idea that compliance must mirror the fiat model, and shows how tools like AML scores could bring sharper, more targeted risk assessments to the sector.

🇪🇺 EBA: SupTech key to smarter supervision

SupTech keeps heating up. This week, the European Banking Authority (EBA) published a short report on how regulators across the EU are using new technology to drive a more data-driven approach to supervision. The EBA says AML/CFT SupTech adoption remains early, but competent authorities already report promising benefits. Poor data quality and governance, limited resources, legal uncertainty, operational risks, and institutional change friction, however, still slow progress. A survey counted 60 SupTech projects across EU member states that have been operational over the last three years, with most aimed at making risk assessments more efficient.

Crucially, the EBA urges tailored adoption by different competent authorities: one-size-fits-all tools often fail. Authorities should build strong safeguards for sensitive data, enable cross-border cooperation through better data interoperability, and enforce clear data-protection principles. Overall, this report is encouraging. The EBA has assisted with the creation of the new Anti-Money Laundering Authority (AMLA) which has specifically called out the financial crime risks of the crypto sector and sets tackling these as a priority. With the right SupTech tools in place, AMLA will be able to accurately measure the illicit finance risks in the crypto space and set an approach to disrupt them.

🗽 NYDFS issues consent order against Paxos for AML violations

Last week, the New York State Department of Financial Services issued a consent order against Paxos Trust Company that’s worth a close look for anyone tracking where regulatory expectations are headed. DFS imposed a USD 26.5 million penalty and required USD 22 million in AML program enhancements through 2027. The findings highlight gaps in due diligence, onboarding, transaction monitoring, and investigations — each offering lessons for the broader market. Enforcement actions like this are more than a response to one firm’s failings; they’re often how regulators send a signal about what “good” looks like and where the bar is moving.

DFS found Paxos relied on unverified third-party assurances — taking Binance’s word on geofencing and Know Your Customer (KYC) controls without independent validation. Onboarding processes missed connections between related accounts, failed to link wallets to customers, and overlooked high-risk jurisdictions or unusual patterns. Transaction monitoring rules were static, leaving them unable to adapt to emerging typologies like rapid cross-chain layering or high-risk exchange hopping. Investigations lacked clear escalation criteria, and responses to law enforcement were inconsistent. Without an integrated system for case management, blockchain tracing, and OSINT, resolving alerts effectively was a challenge.

For other firms, the takeaways are clear: independently verify partner controls, enhance onboarding with on-chain/off-chain linkage and behavioral analytics, implement real-time monitoring tuned to risks, and strengthen investigation workflows with clear guidance and integrated tools. Regular independent testing and resourcing compliance teams with next-gen blockchain intelligence are essential.

The TL;DR? Compliance success today demands real-time detection, advanced analytics, and expert program design to meet the expectations regulators are signaling.

🇺🇸 President Trump signs executive order on crypto 401(k) allocations and debanking

Late last week, President Donald Trump signed an executive order allowing 401(k) retirement plans to include alternative assets such as cryptocurrencies, private equity, and real estate. The order directs the Department of Labor and the SEC to revise regulations and create clear fiduciary safe harbors so plan sponsors can confidently offer these options. It overturns prior guidance that discouraged exposure to nontraditional assets and is intended to give everyday savers access to opportunities once limited to high-net-worth investors.

The move could improve diversification and boost long-term returns, but critics caution that the move may introduce risks such as volatility, illiquidity, high fees, and complex valuation challenges for retirement plans. Financial institutions are already preparing to structure products that integrate crypto and other alternative assets into 401(k) offerings.

Alongside this, Trump issued a separate order aimed at curbing “debanking” — the practice of financial institutions closing accounts based on perceived reputational risk. The directive instructs regulators to investigate account closures, particularly those affecting conservatives and participants in the crypto sector, and to ensure decisions are based on objective, risk-based standards rather than political or industry bias. Together, the orders signal a policy shift toward both expanding access to alternative investments and reinforcing protections for individuals and businesses operating in politically sensitive or emerging industries.

👩‍⚖️Terra Luna founder Do Kwon pleads guilty to wire fraud in federal court

This week, Terra Luna founder Do Kwon pleaded guilty in US federal court to conspiracy to commit fraud and wire fraud tied to the collapse of TerraUSD (UST) and LUNA in 2022. The plea deal calls for a recommended sentence of up to 12 years, forfeiture of USD 19 million, and the relinquishment of his stake in Terraform Labs. The sentencing is set for December 2025 and marks one of the most high-profile crypto fraud convictions to date.

The case centers on Kwon’s role in creating and promoting UST, an algorithmic stablecoin meant to maintain a USD 1 peg through its interplay with the LUNA token. UST was marketed as a stable, high-yield asset—especially through the Anchor Protocol, which promised depositors nearly 20% annual returns. When UST began losing its peg, Kwon secretly relied on a trading firm to artificially support the price, while publicly claiming the system was working as designed. The intervention failed, triggering a hyperinflationary collapse of LUNA, a full de-peg of UST, and the evaporation of roughly USD 40–50 billion in value.

Kwon admitted that he misled investors about UST’s stability, fabricated or overstated Terra’s adoption, and concealed the market manipulation used to delay its collapse. The fallout devastated retail and institutional investors, sparked global market turmoil, and accelerated regulatory scrutiny of algorithmic stablecoins. His conviction underscores growing enforcement pressure on crypto executives who misrepresent products or conceal material facts — especially in cases where failure wipes out billions and undermines trust in the broader market.

Want to read more on the legal proceedings? Check out the TRM Legal Library and listen to TRM’s Ari Redbord on Laura Shin’s Unchained Podcast.

• 3️⃣ The T3 Financial Crime Unit (T3 FCU) — a joint initiative by TRON DAO, Tether.io, and TRM Labs — has surpassed USD 250 million in frozen illicit assets worldwide. This latest figure includes almost USD 6 million frozen in a coordinated effort to thwart proceeds of a pig butchering scam with Binance, the first member of T3’s global collaborator program, T3+. Learn more in this release.

• 🎧 On our latest TRM Talks, Joey Garcia (Bitcoin pioneer and Executive Director of Xapo Bank) joins Ari Redbord to share the story of building a fully licensed, crypto-native bank. They discuss how Gibraltar became an early model for global crypto regulation, why FATF standards are only part of the compliance puzzle, how Xapo blends Bitcoin-native infrastructure with traditional banking, and more. Tune in here.

• 🗓️ With the recent passage of the GENIUS Act, stablecoin regulation in the US is entering new territory. For compliance leaders, both the stakes and expectations have never been higher. Join TRM Labs’ Ari Redbord and Thomas Armstrong, J.D. on August 26 for an informative 45-minute live webinar covering what the GENIUS Act is (and why it matters); how it will impact compliance operations, reporting, and enforcement risk; steps to future-proof your compliance program; and how TRM helps you meet the GENIUS Act’s requirements with confidence. Register for the session here.

• 🎉 We’re excited to welcome Ali Comolli to TRM Labs! A former Assistant US Attorney and one of the FBI’s earliest cryptocurrency experts, Ali brings a unique blend of legal, investigative, and crypto-native expertise to our team. She’ll be leading efforts to expand our training and capacity-building programs for public sector agencies — helping law enforcement and regulators navigate the complex world of blockchain investigations and equipping agencies with the tools, knowledge, and skills they need to stay ahead of emerging threats. Read the full announcement.