Sovereign states and institutional asset managers are adjusting their legal and financial

frameworks around digital assets. This week’s developments track legislative updates in

Japan and South Korea alongside a cross-border regulatory statement from the US and

UK. In corporate finance, BlackRock and Ark Invest are continuing to expand their

allocations and regulatory filings within the stablecoin ecosystem.

Japan Passes Legislation Reclassifying Cryptocurrency as Financial Products

Japan’s parliament has passed amendments to the Financial Instruments and Exchange

Act, officially shifting cryptocurrency regulation from the Payment Services Act to

recognize crypto assets as financial products. Under this new classification, crypto

assets will face stricter regulatory oversight, including explicit insider trading

prohibitions, mandatory annual disclosures for certain issuers, and tougher penalties

for unregistered operations. The legal changes also establish a structural framework to

adjust cryptocurrency taxation, lowering the maximum effective rate from 55% as

miscellaneous income to a separate rate of approximately 20% by January 2028.

Additionally, the enacted bill lays the legal groundwork for traditional institutions to

issue domestic spot cryptocurrency exchange-traded funds, though domestic approval

for specific bitcoin ETFs remains unconfirmed. These legislative amendments are

scheduled to be promulgated in the near future and will take effect within one year of

their official promulgation.

South Korea Incorporates Virtual Assets Into State Management and Advances Crypto Frameworks

South Korea’s Ministry of Economy and Finance plans to introduce the National Asset

Basic Act, replacing a 1950 framework to formally include virtual assets and intellectual

property under state management rules. This legislation establishes specialized

standards for how the government manages and develops assets it owns, including

confiscated cryptocurrency. Alongside this management law, the government’s

economic strategy for the second half of 2026 includes developing its Central Bank

Digital Currency (CBDC) project and progressing the Digital Asset Basic Act, a

framework dedicated to the local crypto and stablecoin sectors. However, the private

market stablecoin legislation remains delayed due to jurisdictional disputes between

the Financial Services Commission and the Bank of Korea over licensing won-pegged

stablecoin issuers and policing reserves. To resolve part of this dispute, the central bank

informed lawmakers that bank-led consortia should be prioritized for stablecoin

issuance. Consequently, South Korea will transition to formally managing its own virtual

assets under statute while the private crypto sector continues to wait for finalized

regulatory rules.US and UK Affirm Joint Regulatory Principles for Stablecoin Integration

The United States and United Kingdom governments, through the Transatlantic

Taskforce for Markets of the Future established in September 2025, issued a joint

statement outlining shared regulatory objectives for the stablecoin sector. Both

jurisdictions intend to support cross-border finance and payments by establishing

consistent legal and supervisory frameworks for private digital money solutions. The

joint position affirms that stablecoins intended for use as money must be backed on at

least a one-to-one basis by high-quality, liquid assets that are segregated from the

issuer’s own funds. Furthermore, the countries plan to develop insolvency frameworks

ensuring that stablecoin holders maintain a protected legal claim on reserves with

priority over other creditors during a bankruptcy or restructuring proceeding. Finally, the

framework outlines an intention to explore formal pathways allowing stablecoins

regulated and issued within one jurisdiction to legally access the market of the other.

BlackRock Integrates Crypto and Stablecoin Reserves Into Asset Management Infrastructure

BlackRock currently manages $60 billion in reserves for Circle, representing

approximately 25% of the total $300 billion stablecoin market. To deepen its integration

with the digital asset ecosystem, the firm filed registration statements with the SEC for

two tokenized money market funds designed to support stablecoin-enabled

subscriptions and redemptions on-chain. According to financial disclosures,

BlackRock’s total assets under management connected to digital assets stand at

approximately $110 billion, despite a 40% year-over-year decline in crypto AUM during

the second quarter caused by falling Bitcoin and Ethereum prices. Even as Bitcoin and

Ethereum prices declined by 30% during the quarter, BlackRock recorded over $650

million in inflows into its European Bitcoin ETF. To capture this ongoing international

demand, the company’s stated strategy is to enable investors to allocate capital across

crypto and stablecoins natively within digital wallets. This digital asset infrastructure

forms the basis of BlackRock’s 2030 business plan, which aims to generate $500 million

in revenue from its digital asset operations.

Ark Invest Expands Circle Holdings Amid Regulatory Milestones and Stablecoin Competition

Cathie Wood’s Ark Invest purchased 220,012 shares of Circle Internet Group, valued at

approximately $13.9 million, across three of its exchange-traded funds on Tuesday. This

institutional buying follows the Office of the Comptroller of the Currency’s (OCC)regulatory

approval of Circle’s national trust bank charter, which permits the company

to manage its USD Coin (USDC) reserves under federal oversight. Circle’s president,

Heath Tarbert, highlighted USDC’s circulating supply of approximately $73 billion as a

primary competitive advantage. Despite these regulatory developments, Circle faces

rising market competition from a 140-company stablecoin consortium and the recent

launch of a rival stablecoin project, Open USD. Citing the competitive threat posed by

Open USD to Circle’s future business, Mizuho analysts recently downgraded Circle to

“Underperform” and lowered their price target to $50. Consequently, while Circle’s

stock experienced minor daily gains, its price remains approximately 76% below its

post-IPO peak.

With thanks to Dean Shuker and Aviv Barkan