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Digital assets as collateral: why ISLA’s legal advice from Ashurst is timely

Yesterday, the International Securities Lending Association (ISLA) announced it appointed Ashurst to perform a preliminary legal analysis on its Global Master Securities Lending Agreement (GMSLA) in the context of digital assets. Recent events, including the Celsius bankruptcy, have highlighted several legal gray areas regarding the title to digital assets, especially when pledged as security.

The Ashurst work will explore title transfer and security interest over pledged collateral. In terms of digital assets, ISLA said the focus is on tokenized traditional assets, native digital securities and forms of digital cash. This doesn’t appear to include cryptocurrencies, but we’ve asked for clarification, as this is the area with the most pitfalls. And much of the rest of this article focuses on crypto issues.

“The appointment of Ashurst to help chart our way through this landscape, ensures that the GMSLA agreements published by ISLA and used for securities lending activity globally are able to support our membership’s ability to leverage these new opportunities,” said David Shone, Director of Market Infrastructure & Technology at ISLA.

Celsius bankruptcy highlights a tricky topic
Ten days ago, a filing relating to the bankruptcy of crypto lender Celsius highlighted the challenging legal issues around digital assets used as collateral and cryptocurrencies in particular.

Any activities in the 90-day run-up to bankruptcy are reviewed to ensure some creditors aren’t disadvantaged relative to others. An $841 million transaction between Tether and Celsius is under review.

Infamously Celsius borrowed money from stablecoin firm Tether with a balance of $841 million still owing when it came to the crypto crash in May. Tether requested additional collateral in May and June, which Celsius could not provide. So it agreed that Tether could liquidate the existing cryptocurrency collateral with a loss of roughly $97 million.

This seems like a legitimate transaction. However, because of the novel legal position of cryptocurrencies, there’s a possibility that Celsius may be able to reclaim the funds turning Tether into an unsecured creditor. That’s because it’s unclear whether Tether had the right to the collateral.

In the United States, many of these transactions are governed by the Uniform Commercial Code (UCC), which is adopted by all states, at least in part. New UCC rules relating to digital assets that address many of the issues are about to come into force. Until then, there are challenges because cryptocurrencies such as Bitcoin are considered general intangible assets.

To secure title to the crypto, Tether would need to have:

filed a UCC-1 financing statement with the secretary of state where the debtor is located to ‘perfect’ its security interest in the digital assets, or
morph the digital assets from intangible into an investment property by having a custodian look after the keys.
In addition to the Tether scenario, another potential pitfall is that digital assets carry past liens. This was highlighted in a document penned by Tim Swanson (pg 36) back in 2015. In other words, even if someone quite innocently buys some Bitcoin, if they were pledged as security to somebody else, the buyer is out of luck.

The UK is also reviewing digital assets laws
At the end of July, the Law Commission of England and Wales opened a consultation on digital assets as personal property. It includes addressing the last point – if someone buys digital assets in good faith, unaware of any other party’s claim to it, they will retain ownership of the token.

The UK currently recognizes two kinds of personal property, things in possession (tangible objects) and things in action (property claimable through legal action or proceedings). It suggests creating a third category, ‘data objects’.

It also covers liens on digital assets, requiring them to be in writing.

How does this fit in with Basel III rules?
Banks have to comply with Basel III rules to protect their balance sheets from volatile events. The treatment of crypto-assets is currently being considered, and cryptocurrencies are treated as the highest possible risk. The first proposal didn’t account for hedging. In other words, if a bank had a long position in a crypto-asset and a put option, they would both be counted as risks rather than offsetting them.

However, last month’s Basel proposal allows for offsetting if there’s hedging.

If there are legal title issues, particularly with collateral, some offsets may not reduce risk as intended resulting in greater risk to a bank’s balance sheet.

We wondered about the murky legal position of digital assets, so we looked at the Basel wording. It puts the onus on the banks to establish legal clarity.

Is the digital asset legal title issue on anyone’s radar?
When the Financial Times highlighted the Celsius/Tether topic, we reached out to a handful of organizations to see whether these issues were on their radar. They included banks, custodians, and industry bodies (not ISLA). Judging by the response, we’d conclude that these particular legal risks have not been sufficiently considered. But ISLA’s commissioning Ashurst means that’s changing.

https://www.ledgerinsights.com/digital-assets-as-collateral-why-islas-legal-advice-from-ashurst-is-timely/

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Ripple CEO on partnership with BNY to serve as custodian of stablecoin
00:01:12
Brad Garlinghouse In Washington 🚀

It’s time for a fair and open level playing field.

Under Gary Gensler it was quite the opposite.

  • Brad Garlinghouse
    July 9, 2025
00:01:56
More Of The Same...l

🚨 JUST IN: Patriot Tom Fitton, who has been fighting DOJ and FBI to release documents for years, has practically thrown in the towel.

👉 "The justice department and the FBI are irredeemably compromised and corrupted.
The leadership needs to understand that and act accordingly." ~Tom Fitton

00:01:30
👉 Coinbase just launched an AI agent for Crypto Trading

Custom AI assistants that print money in your sleep? 🔜

The future of Crypto x AI is about to go crazy.

👉 Here’s what you need to know:

💠 'Based Agent' enables creation of custom AI agents
💠 Users set up personalized agents in < 3 minutes
💠 Equipped w/ crypto wallet and on-chain functions
💠 Capable of completing trades, swaps, and staking
💠 Integrates with Coinbase’s SDK, OpenAI, & Replit

👉 What this means for the future of Crypto:

1. Open Access: Democratized access to advanced trading
2. Automated Txns: Complex trades + streamlined on-chain activity
3. AI Dominance: Est ~80% of crypto 👉txns done by AI agents by 2025

🚨 I personally wouldn't bet against Brian Armstrong and Jesse Pollak.

👉 Coinbase just launched an AI agent for Crypto Trading

🎁 As of July 8th there have been 84 VERI SmartMetal NFT Activations (1.3%). With shipments ramping up, we witness the corresponding jump in activations.

Need help getting started? Check out our knowledge base to get the info you need: https://veridao.freshdesk.com/support/solutions/articles/51000487052-what-are-the-nft-activation-steps

👉Interested in which NFTs have been activated? Check them out here:
https://basescan.org/token/0x4516a5d613c30a36d157d3b579813734cbb929a4

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🚨BREAKING: The US House Committee on Financial Services says that next week the House will deliver on President Trump's call to make the US the "crypto capital of the world!

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Brinc Launches Web3 Accelerator with Octopus, XDC & IDA

Brinc Launches Web3 Accelerator with Octopus, XDC & IDA to Transform Hong Kong’s Loyalty and Payment Systems.

Read more: https://www.brinc.io/blog/brinc-launches-octopus-backed-web3-accelerator-program-to-revolutionize-hong-kongs-retail-loyalty-and-payment-ecosystem-with-xdc-and-ida-as-key-web3-infrastructure-partners/

🔗 Startups can apply from July 10

📅 Launching Sept 8

Learn more about the Web3 Accelerator program and apply now: https://www.brinc.io/stablecoin-accelerator/

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Musk Turns On Starlink to Save Iranians from Regime’s Internet Crackdown

Elon Musk, the world’s richest man and a visionary behind SpaceX, has flipped the switch on Starlink, delivering internet to Iranians amid a brutal regime crackdown.

This move comes on the heels of Israeli strikes targeting Iran’s nuclear facilities, as the Islamic Republic cuts off online access.

The former Department of Government Efficiency chief activated Starlink satellite internet service for Iranians on Saturday following the Islamic Republic's decision to impose nationwide internet restrictions.

As the Jerusalem Post reports, that the Islamic Republic’s Communications Ministry announced the move, stating, "In view of the special conditions of the country, temporary restrictions have been imposed on the country’s internet."

This action followed a series of Israeli attacks on Iranian targets.

Starlink, a SpaceX-developed satellite constellation, provides high-speed internet to regions with limited connectivity, such as remote areas or conflict zones.

Elizabeth MacDonald, a Fox News contributor, highlighted its impact, noting, "Elon Musk turning on Starlink for Iran in 2022 was a game changer. Starlink connects directly to SpaceX satellites, bypassing Iran’s ground infrastructure. That means even during government-imposed shutdowns or censorship, users can still get online, and reportedly more than 100,000 inside Iran are doing that."

During the 2022 "Woman, Life, Freedom" protests, Starlink enabled Iranians to communicate and share footage globally despite network blackouts," she added.

MacDonald also mentioned ongoing tests of "direct-to-cell" capabilities, which could allow smartphone connections without a dish, potentially expanding access and supporting free expression and protest coordination.

Musk confirmed the activation, noting on Saturday, "The beams are on."

This follows the regime’s internet shutdowns, which were triggered by Israeli military actions.

Adding to the tension, Israeli Prime Minister Benjamin Netanyahu addressed the Iranian people on Friday, urging resistance against the regime.

"Israel's fight is not against the Iranian people. Our fight is against the murderous Islamic regime that oppresses and impoverishes you,” he said.

Meanwhile, Reza Pahlavi, the exiled son of Iran’s last monarch, called on military and security forces to abandon the regime, accusing Supreme Leader Ayatollah Ali Khamenei in a Persian-language social media post of forcing Iranians into an unwanted war.

Starlink has been a beacon in other crises. Beyond Iran, Musk has leveraged Starlink to assist people during natural disasters and conflicts.

In the wake of hurricanes and earthquakes, Starlink has provided critical internet access to affected communities, enabling emergency communications and coordination.

Similarly, during the Ukraine-Russia conflict, Musk activated Starlink to support Ukrainian forces and civilians, ensuring they could maintain contact and access vital information under dire circumstances.

The genius entrepreneur, is throwing a lifeline to the oppressed in Iran, and the libs can’t stand it.

Conservative talk show host Mark Levin praised Musk’s action, reposting a message stating that Starlink would "reconnect the Iranian people with the internet and put the final nail in the coffin of the Iranian regime."

"God bless you, Elon. The Starlink beams are on in Iran!" Levin wrote.

Musk, who recently stepped down from leading the DOGE in the Trump administration, has apologized to President Trump for past criticisms, including his stance on the One Big Beautiful Bill.

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GENIUS Act lets State banks conduct some business nationwide. Regulators object

The Senate passed the GENIUS Act for stablecoins last week, but significant work remains before it becomes law. The House has a different bill, the STABLE Act, with notable differences that must be reconciled. State banking regulators have raised strong objections to a provision in the GENIUS Act that would allow state banks to operate nationwide without authorization from host states or a federal regulator.

The controversial clause permits a state bank with a regulated stablecoin subsidiary to provide money transmitter and custodial services in any other state. While host states can impose consumer protection laws, they cannot require the usual authorization and oversight typically needed for out-of-state banking operations.

The Conference of State Bank Supervisors welcomed some changes in the GENIUS Act but remains adamantly opposed to this particular provision. In a statement, CSBS said:

“Critical changes must be made during House consideration of the legislation to prevent unintended consequences and further mitigate financial stability risks. CSBS remains concerned with the dramatic and unsupported expansion of the authority of uninsured banks to conduct money transmission or custody activities nationwide without the approval or oversight of host state supervisors (Sec. 16(d)).”

The National Conference of State Legislatures expressed similar concerns in early June, stating:

“We urge you to oppose Section 16(d) and support state authority to regulate financial services in a manner that reflects local conditions, priorities and risk tolerances. Preserving the dual banking system and respecting state autonomy is essential to the safety, soundness and diversity of our nation’s financial sector.”

Evolution of nationwide authorization

Section 16 addresses several issues beyond stablecoins, including preventing a recurrence of the SEC’s SAB 121, which forced crypto assets held in custody onto balance sheets. However, the nationwide authorization subsection was added after the legislation cleared the Senate Banking Committee, with two significant modifications since then.

Originally, the provision applied only to special bank charters like Wyoming’s Special Purpose Depository Institutions or Connecticut’s Innovation Banks. Examples include crypto-focused Custodia Bank and crypto exchange Kraken in Wyoming, plus traditional finance player Fnality US in Connecticut. Recently the scope was expanded to cover most state chartered banks with stablecoin subsidiaries, possibly due to concerns about competitive advantages.

Simultaneously, the clause was substantially tightened. The initial version allowed state chartered banks to provide money transmission and custody services nationwide for any type of asset, which would include cryptocurrencies. Now these activities can only be conducted by the stablecoin subsidiary, and while Section 16(d) doesn’t explicitly limit services to stablecoins, the GENIUS Act currently restricts issuers to stablecoin related activities.

However, the House STABLE Act takes a more permissive approach, allowing regulators to decide which non-stablecoin activities are permitted. If the House version prevails in reconciliation, it could result in a significant expansion of allowed nationwide banking activities beyond stablecoins.

Is it that bad?

As originally drafted, the clause seemed overly permissive.

The amended clause makes sense for stablecoin issuers. They want to have a single regulator and be able to provide the stablecoin services throughout the United States. But it also leans into the perception outside of crypto that this is just another form of regulatory arbitrage.

The controversy over Section 16(d) reflects concerns about creating a regulatory gap that allows banks to operate interstate without the oversight typically required from either federal or state authorities. As the two Congressional chambers work toward reconciliation, lawmakers must decide whether stablecoin legislation should include provisions that effectively reduce traditional banking oversight requirements.

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If you find value in my content, consider showing your support via:

💳 PayPal: 
1) Simply scan the QR code below 📲
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🔗 Crypto – Support via Coinbase Wallet to: [email protected]

Or Buy me a coffee: https://buymeacoffee.com/thedinarian

Your generosity keeps this mission alive, for all! Namasté 🙏 Crypto Michael ⚡  The Dinarian

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Dubai regulator VARA classifies RWA issuance as licensed activity
Virtual Asset Regulatory Authority (VARA) leads global regulatory framework - makes RWA issuance licensed activity in Dubai.

Real-world assets (RWAs) issuance is now licensed activity in Dubai.

~ Actual law.
~ Not a legal gray zone.
~ Not a whitepaper fantasy.

RWA issuance and listing on secondary markets is defined under binding crypto regulation.

It’s execution by Dubai.

Irina Heaver explained:

“RWA issuance is no longer theoretical. It’s now a regulatory reality.”

VARA defined:

- RWAs are classified as Asset-Referenced Virtual Assets (ARVAs)

- Secondary market trading is permitted under VARA license

- Issuers need capital, audits, and legal disclosures

- Regulated broker-dealers and exchanges can now onboard and trade them

This closes the gap that killed STOs in 2018.

No more tokenization without venues.
No more assets without liquidity.

UAE is doing what Switzerland, Singapore, and Europe still haven’t:

Creating enforceable frameworks for RWA tokenization that actually work.

Matthew White, CEO of VARA, said it perfectly:

“Tokenization will redefine global finance in 2025.”

He’s not exaggerating.

$500B+ market predicted next year.

And the UAE just gave it legal rails.

~Real estate.
~Private credit.
~Shariah-compliant products.

Everything is in play.

This is how you turn hype into infrastructure.

What Dubai is doing now is 3 years ahead of everyone else.

Founders, investors, ecosystem builders:

You want to build real-world assets onchain.

Don’t waste another year waiting for clarity.

Come to Dubai.

It’s already here.

 

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🙏 Donations Accepted 🙏

If you find value in my content, consider showing your support via:

💳 PayPal: 
1) Simply scan the QR code below 📲
2) or visit https://www.paypal.me/thedinarian

🔗 Crypto – Support via Coinbase Wallet to: [email protected]

Or Buy me a coffee: https://buymeacoffee.com/thedinarian

Your generosity keeps this mission alive, for all! Namasté 🙏 Crypto Michael ⚡  The Dinarian

 

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