Joshua Garcia, Daniel Isaacs and Vani Upadhyaya Examine Digital Asset Licensing Challenges in Bloomberg Law

Morrison Cohen Digital Assets Partners Joshua Garcia and Daniel Isaacs and Associate Vani Upadhyaya authored an article in Bloomberg Law titled “Digital Asset Companies Struggle Under Patchwork State Licensing.”

The article explores how digital asset companies continue to face significant compliance hurdles despite a thaw in the broader regulatory and political climate. At the core of these challenges is a fragmented federal and state money transmission licensing system that forces inherently national digital asset businesses to navigate a “de facto 50-jurisdiction patchwork” of regulatory rules. Although these laws are intended to protect consumers, in practice, “they produce a duplicative and often contradictory regulatory environment.”

The authors analyze emerging federal licensing pathways, including the GENIUS Act’s proposed framework for payment stablecoin issuers and national bank or trust charters from the Office of the Comptroller of the Currency, which offer the promise of streamlined supervision and limited federal preemption. However, these options carry significant costs, supervisory burdens and legal uncertainty, and may remain inaccessible for many firms.

At the state level, divergent licensing thresholds, capital and reserve requirements and bespoke regulatory obligations create ongoing uncertainty and operational strain. In some cases, state regimes effectively force companies to structure their balance sheets around the most restrictive state in which they operate, regardless of where customers reside.

The article concludes by examining the potential role of federal preemption and constitutional challenges, noting that while courts have been deferential to state consumer protection laws, regulatory frameworks that “effectively regulate conduct outside a state’s borders” may invite renewed scrutiny.

“Absent state action, courts or Congress may ultimately resolve these tensions,” the authors write. “For now, state lawmakers have a window to modernize and harmonize their regimes proactively.”

Read the full article here.