Chris Davis, JD, CPA
Partner

Chris co-chairs Gray Reed’s Blockchain and Digital Asset Practice. He also serves as Gray Reed’s Government Investigations & Compliance Practice Group Leader. He guides businesses and individuals through high-stakes federal and state investigations, criminal proceedings, and civil enforcement actions involving securities fraud, insider trading, healthcare fraud, FCPA violations, False Claims Act claims, and pay-to-play schemes. He also represents clients in complex commercial disputes across the country and internationally in industries including healthcare, energy, financial services, fintech, real estate, technology, and retail.

 

As a former Senior Trial Counsel in the SEC’s Fort Worth Regional Office, Chris led litigation nationwide against individuals and entities charged with violating federal securities laws. He investigated and prosecuted high-profile matters involving cryptocurrency-based securities, Ponzi schemes, accounting fraud, and insider trading. While with the SEC, he also was also lead counsel in the SEC’s first ever receivership involving an offering of digital assets.

 

A licensed CPA since 2000, Chris spent seven years in management consulting at a Big Four firm before entering law school. He draws on his experience as a government regulator, CPA, and consultant to help clients build proactive compliance programs, minimize regulatory and business risks, and conduct internal investigations to resolve issues before they escalate.

 

Before joining the SEC in 2010, Chris worked in the trial department of a large international law firm, where he served as lead counsel in civil and commercial litigation matters involving white-collar issues, intellectual property, contract disputes, and professional malpractice. He is a frequent presenter on cybersecurity, digital currencies, and government enforcement and compliance topics.

Joshua D. Smeltzer
Partner

Joshua D. Smeltzer is a Board Certified tax law specialist and experienced trial lawyer who advises corporations, partnerships, family offices, and high-net-worth individuals. A former trial attorney with the U.S. Department of Justice, he brings more than two decades of government and private-sector experience to high-stakes civil and criminal federal litigation nationwide, with matters ranging from $500,000 to over $1.5 billion.

As Chair of Gray Reed’s Tax Controversy & Litigation practice and co-chair of its Blockchain and Digital Asset practice, Joshua excels at distilling complex tax, financial, and regulatory issues into clear themes for judges, juries, and government agencies. He represents clients through every stage of federal controversies in district courts, the U.S. Tax Court, and other forums.

Joshua’s litigation and advisory work spans financial services, private equity, energy, real estate, and emerging technologies such as artificial intelligence and digital assets. His Department of Justice background gives clients a strategic advantage when navigating government investigations and litigation.

A recognized thought leader on tax, corporate governance, digital assets, and regulatory compliance, Joshua serves as editor of Gray Reed’s Dollars & Sense blog, regularly contributes to Forbes and other national publications, and speaks at conferences throughout the U.S. and internationally.

He has earned seven Outstanding Trial Attorney awards from the Department of Justice and is consistently recognized among the top practitioners in his field by private rating services.

Suhani J. Patel
Associate

Suhani Patel guides clients through financial regulatory investigations, leveraging her previous experience at FINRA to provide unique insight into government enforcement actions. She specializes in analyzing complex data sets to identify regulatory violations, including excessive trading, RegBI, private placement, and money laundering issues under FINRA and SEC rules.

Suhani manages cases from initiation to conclusion, conducting comprehensive document review, formulating detailed information requests and leading on-record testimony. She has worked closely with senior attorneys to develop investigative strategies using data analytics and other specialized tools. Suhani also has significant experience drafting complaints and corresponding memoranda for litigation matters.

The Digital Asset Revolution: Where American Law Stands and Where It Is Headed

The first notable digital asset transaction occurred sixteen years ago: 10,000 Bitcoin for two pizzas. Today, those Bitcoin are worth about $815 million—enough to buy a pizza company. Digital assets have evolved from funding late-night cravings to becoming a central pillar of American economic policy, a bipartisan legislative priority, and an urgent concern for regulators, law enforcement, investors, and taxpayers.

How does the United States regulate a technology pet project turned multi-trillion-dollar ecosystem touching payments, lending, investing, banking, and national security? The answer involves federal legislation, proposed bills, informal agency guidance, court decisions, and gap-filling state laws—all reshaping how traditional financial institutions interact with crypto and stablecoins.

Informal Guidance

When rules and interpretive guidance are not codified, they remain subject to the whims of the next bureaucratic official and prevailing political winds.

Federal Agency Guidance

SEC and CFTC

Effective March 23, 2026, the SEC and CFTC issued joint interpretive guidance on federal securities laws’ application to certain crypto assets and transactions. The interpretive guidance classifies crypto assets into five categories (digital commodities, digital collectibles, digital tools, stablecoins, and digital securities), only the last of which is considered a security. Critically, the guidance distinguishes between crypto assets and investment contracts (which are securities), and clarifies that protocol mining, staking, wrapping, and airdrops generally do not involve securities offerings. This signals a shift, with SEC Chairman Paul Atkins declaring the SEC has stopped regulation by enforcement. The SEC’s Division of Enforcement acknowledged that dozens of crypto cases since 2022 have found no investor harm and produced no additional investor benefits, reflecting a misallocation of SEC resources. The Division of Trading and Markets also published FAQs on crypto asset activities.

IRS and Treasury Department

The IRS and Treasury have issued several pieces of guidance on digital asset taxation, though much needed clarity remains missing. Below are the primary guidance documents addressing broad taxation issues.

IRS Notice 2014-21 established the fundamental principle that virtual currency is property, not currency, for federal tax purposes— affecting how gains and losses are recognized, how basis is computed, how mining and staking rewards are taxed, and what information reporting obligations apply. However, the Notice’s original background discussion stated that virtual currency did not have legal tender status in any jurisdiction, a statement the IRS later removed in Notice 2023-34 after certain jurisdictions recognized Bitcoin as legal tender.

IRS Rev. Rul. 2019-24 addresses hard forks and airdrops. It establishes ¹https://www.federalregister.gov/documents/2026/03/23/2026-05635/application-of-the-federal-securities-laws-to-certain-types-of-crypto-assets-and-certain. under a hard fork if the taxpayer does not receive new cryptocurrency they do not have income under IRC Section 61, and ²SEC v. W.J. Howey Co., 328 U.S. 293 (1946). a taxpayer recognizes gross income under IRC Section 61, ordinary in character, upon receipt of new cryptocurrency from an airdrop following a hard fork. Critically, a taxpayer does not have receipt if they are unable to exercise dominion and control over the airdropped cryptocurrency.

IRS Notice 2014-21 also addresses mining income: a taxpayer who successfully mines virtual currency must include its fair market value in gross income as of the date of receipt. If mining constitutes a trade or business and is not undertaken as an employee, net earnings are subject to self-employment tax.

Congress has introduced comprehensive digital asset tax legislation addressing a $300 de minimis exclusion, wash sale rules, and deferral of mining and staking income recognition. The Senate Finance Committee hearings indicate broad bipartisan agreement that outdated tax rules risk driving innovation abroad, but detailed tax legislation remains elusive.

FinCEN and OFAC

On April 10, 2026, FinCEN and Office of Foreign Assets Control (OFAC) jointly issued a proposed rule implementing the GENIUS Act’s directive to treat permitted payment stablecoin issuers (PPSIs) as financial institutions under the Bank Secrecy Act, along with anti-money laundering and sanctions requirements. These actions reflect coordinated efforts to balance pro-innovation appetite with a compliance-oriented regulatory framework for digital assets in the United States.

Court Cases: Filling the Legislative Void

Without comprehensive legislation or regulatory guidance, court cases brought by the DOJ and SEC shaped the regulatory landscape. The SEC’s cases against Coinbase and Binance tested securities laws’ application to digital asset intermediaries, while the Ripple Labs case tested whether XRP was a security (answer: it depends). These cases had far-reaching implications but yielded conflicting answers, producing an unsettled environment. The “Howey test” remains the standard for analyzing potential investment contracts, including crypto assets, but applying it to decentralized digital assets—especially with no meaningful SEC guidance during Gary Gensler’s tenure—proved deeply contentious.2

On the criminal enforcement side, the DOJ aggressively pursued market manipulation, fraud, and money laundering cases in the digital asset space. The Celsius Network collapse resulted in its former CEO pleading guilty to securities and commodities fraud. Beyond high-profile corporate failures, the DOJ targeted market makers engaged in wash trading, prosecuted Tornado Cash operators for laundering funds tied to sanctioned entities and secured a conviction in the Mango Markets DeFi protocol exploitation case. Enforcement is expanding into cryptocurrency-facilitated tax evasion, ransomware payments, fraudulent ICOs, and “pig-butchering” investment scams. The DOJ has also created a new fraud-focused litigating division likely to target digital asset fraud.

The CLARITY Act: Proposed Legislation

The Digital Asset Market CLARITY Act of 2025 (“the CLARITY Act”), with bipartisan House support, is now pending before the full Senate after passing the Senate Banking Committee in May 2026. It proposes a comprehensive jurisdictional division between the SEC and CFTC, establishing a registration regime for digital commodity exchanges, brokers, and dealers under CFTC oversight while preserving SEC authority over digital asset securities. The CLARITY Act harmonizes with the GENIUS Act by incorporating permitted payment stablecoin concepts while excluding such stablecoins from the digital commodity definition.

A central feature of the Senate Banking Committee-revised CLARITY Act is its framework for determining when a digital asset initially offered as part of an investment contract can “separate” from that contract and trade as a non-security. The bill organizes this around two concepts— an “ancillary asset” (a network token whose value depends on entrepreneurial or managerial efforts of an originator) and a “network token” treated as a non-security if it satisfies the Act’s conditions. Rather than the House-passed “mature blockchain system” certification, the Senate version ties this transition to a certification that the underlying distributed ledger system is “not under coordinated control”—a certification that takes effect automatically unless the SEC denies it within 90 days. The bill preserves protections for decentralized finance activities, excludes software developers and self-custody wallet providers from registration, and confirms national banks may use digital assets or distributed ledgers for any otherwise-authorized activity. This measure may be further modified before final enactment.

The GENIUS Act

On July 18, 2025, the first digital asset legislation was signed into law: the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”). It created a comprehensive federal framework for “payment stablecoins”—digital assets designed for payment or settlement where the issuer must convert, redeem, or repurchase the asset for a fixed monetary value and represents it will maintain stable value. Excluded are national currencies, deposits under the Federal Deposit Insurance Act, and securities under existing law.

The GENIUS Act amends “security” definitions under the Securities Act, Exchange Act, Investment Advisers Act, and Investment Company Act to exclude payment stablecoins issued by permitted issuers. It similarly amends the Commodity Exchange Act to exclude such stablecoins from “commodity.” This dual exclusion ends uncertainty about stablecoin classification.

The Act establishes a dual federal-state architecture. Issuers at or below $10 billion may opt for state-level regulation if substantially similar to the federal framework. Florida enacted the first state-level stablecoin legislation, creating a safe harbor exempting qualifying issuers from Chapter 560 money services business licensure. Issuers exceeding $10 billion must transition to the federal framework within 360 days or cease issuing.

Federal issuers are regulated by the Office of the Comptroller of the Currency (“OCC”) and must back outstanding stablecoins with reserves on at least a one-to-one basis in high-quality liquid assets— U.S. currency, demand deposits, Treasury bills maturing in 93 days or less, certain repurchase agreements, and money market fund shares. Issuers must redeem stablecoins at face value on request and publish monthly reserve reports. As “financial institutions” under the Bank Secrecy Act, permitted issuers are subject to AML program, suspicious activity reporting, customer identification, and sanctions requirements.

Institutional Impact

The CLARITY Act and GENIUS Act directly shape how banks interact with digital assets. The CLARITY Act bars regulators from forcing banks to book custodied digital assets as liabilities, hold capital against them except for operational risk, and prohibits the Federal Reserve from issuing digital currency or offering financial products directly to individuals. It also authorizes national and insured state banks to use blockchain systems for any otherwise-authorized activity. The GENIUS Act complements this—Section 16 preserves bank authority to accept deposits, use distributed ledgers, and provide custodial services for stablecoins and reserves. Like the CLARITY Act, it shields banks from balance-sheet and capital charges on custodied digital assets beyond operational-risk mitigation and caps consolidated capital requirements for stablecoin-issuer subsidiaries. Payment stablecoins carry no Federal deposit insurance and are not backed by the full faith and credit of the United States.

Banking Regulators: The Federal Reserve, FDIC, and OCC

Federal banking regulators moved to dismantle regulatory barriers banks faced with digital assets. OCC Interpretive Letter No. 1183 (March 2025) confirmed national banks may engage in digital asset custody, stablecoin activities, and blockchain-based payments without prior approval. The Federal Reserve rescinded its 2023 supervisory policy, replacing it with an approach permitting uninsured state member banks to innovate. The FDIC rescinded its prior notification requirement, affirming banks need no agency permission for otherwise permissible crypto-related activities, including custody, stablecoin reserve management, issuance, blockchain settlement, and lending.

The FDIC issued the first proposed rule under the GENIUS Act for FDIC-supervised institution subsidiaries to become permitted payment stablecoin issuers. The OCC issued its own application measure in February 2026, and the Federal Reserve may authorize uninsured state banks to engage in activities not permissible for national banks. The President’s Working Group recommended banking agencies relaunch crypto innovation efforts.

Non-Bank Entities and Credit Unions

Non-bank entities, defined under the GENIUS Act as any person that is not a depository institution or its subsidiary, may become Federal qualified payment stablecoin issuers upon OCC approval. Once approved, they must satisfy the same capital, liquidity, BSA/ AML, and sanctions obligations as banks and transition to federal oversight when consolidated outstanding issuance exceeds $10 billion. The CLARITY Act reinforces these guardrails by barring companies deriving majority of their revenue from non-financial activities from retaining or acquiring control of a qualified payment stablecoin issuer, and by directing the Federal Reserve Board to establish streamlined procedures for non-bank entities seeking activity determinations. Together, the statutes create a clear on-ramp for non-bank innovators to issue stablecoins while subjecting them to bank-equivalent prudential standards and ownership restrictions.

Credit unions qualify as insured depository institutions under the GENIUS Act, presumably meaning subsidiaries can become permitted payment stablecoin issuers with the NCUA as primary regulator. Credit unions may accept shares, issue digital assets representing those shares, utilize distributed ledgers, and provide custodial services for payment stablecoins and reserves. They do not need to record custodied digital assets as balance-sheet liabilities or hold regulatory capital against them beyond operational-risk requirements—this is reinforced by the CLARITY Act. Together, these statutes position credit unions as full participants in the payment stablecoin ecosystem while shielding them from unduly burdensome capital and accounting mandates.

Uniform Commercial Code

The 2022 UCC amendments introduced Article 12, “Controllable Electronic Records,” creating a new asset category called a “controllable electronic record” (CER) encompassing cryptocurrencies, NFTs, and similar digital assets. Article 12 establishes a “take-free” rule: a “qualifying purchaser” who obtains control of a CER for value, in good faith, and without notice of a property claim takes free of other property rights. Before Article 12, there was no take-free rule for digital assets, and checking for pre-existing claims was often nearly impossible, a fundamental obstacle to free transferability. Texas and other states have adopted their own versions, sometimes differing in terminology and scope.

Conclusion

The Bitcoin network, and those pizza purchases, launched a rethinking of financial systems. Between the GENIUS Act’s stablecoin framework, the CLARITY Act’s SEC-CFTC jurisdictional boundaries, banking regulators dismantling barriers, and state governments guiding local institutions, we are seeing a new financial system’s contours develop.

Unfortunately, most current guidance is informal—and informal guidance shifts with each new administration and its enforcement priorities. For practitioners, institutions, businesses, investors, and taxpayers navigating this area, passage of pending legislation and continued debate over further measures remain essential.