The Block & Order Brief: Audits, State Power, Market Infrastructure, and January’s Signals of Maturity

By: Moish E. Peltz, Esq. and Kyle M. Lawrence, Esq.

January underscored a quiet but consequential shift in the digital asset industry. Across recent Block & Order conversations and the January Weekly Dockets, the message was consistent: crypto is no longer being judged primarily on innovation, but on whether it can withstand institutional scrutiny. Audits, regulatory coordination, and durable market infrastructure have moved to the center of the conversation.

Below are the key themes that defined the month.

Audits as a Baseline Expectation

The January episode of Block & Order featuring Steven Baum framed audits not as a differentiator, but as a prerequisite for participation in today’s crypto markets. As more companies pursue IPOs, acquisitions, and enterprise partnerships, audited financials have become table stakes rather than a signal of exceptional maturity.

Baum explained that while on-chain transparency changes how audits are conducted, it does not eliminate risk. Instead, risk increasingly concentrates around governance, internal controls, and off-chain arrangements. For companies operating at scale, remaining unaudited is no longer neutral — it limits access to capital and counterparties. That reality mirrors broader market behavior, as investors and institutional partners increasingly benchmark crypto firms against traditional financial standards.

Digital Asset Treasuries and Structural Risk

Baum also placed digital asset treasury companies (DATs) in a broader institutional context. Rather than focusing on individual failures, the discussion highlighted structural concerns: many DATs function primarily as balance-sheet vehicles without underlying operating businesses.

As treasuries grow more complex, layered custody arrangements, yield strategies, and third-party dependencies introduce counterparty and governance risks that audits alone cannot resolve. Even when assets are visible on-chain, understanding who controls them, and under what contractual constraints, becomes critical. Baum’s broader point was that transparency is necessary, but insufficient, without disciplined structure.

State Enforcement Steps Into the Foreground

Moish Peltz has been keeping you updated on LinkedIn with the weekly news in our new series, the Block & Order Weekly Docket. If you haven’t been reading, it’s worth summarizing the biggest themes of the month. 

One of January’s clearest trends was the increasing assertiveness of individual regulators. Across multiple jurisdictions, regulators moved to define the boundaries of crypto activity where federal clarity in the US remains incomplete.

Massachusetts became the first U.S. state to force Kalshi to halt sports betting operations, rejecting arguments that CFTC oversight preempts state gambling laws. Portugal ordered internet service providers to block Polymarket after a surge in election-related wagering, aligning with similar actions in France, Germany, and Hungary. In the United States, New York lawmakers proposed legislation that would criminalize operating an unlicensed crypto business, elevating noncompliance from a regulatory issue to a potential criminal offense. California, meanwhile, continued to pursue aggressive enforcement, including settlements against unlicensed lending platforms.

Together, these developments suggest that state-level authority is becoming a primary driver of compliance risk, particularly for platforms operating across jurisdictions.

Institutional Infrastructure Quietly Advances

While enforcement intensified, January also revealed steady progress on the infrastructure side. Major financial institutions continued to experiment with blockchain-based systems, often with far less fanfare than earlier crypto cycles.

The New York Stock Exchange advanced work on a tokenized equities trading platform designed to support T+0 settlement and 24/7 trading, partnering with BNY Mellon and Citigroup to explore stablecoin-funded transactions outside traditional banking hours. The Algorand Foundation relocated its headquarters to Delaware, signaling growing confidence in U.S. jurisdiction for financial infrastructure developers.

Outside capital markets, on-chain settlement gained traction in real-world use cases. A $13.9 million USDT-funded commercial real estate transaction in Miami demonstrated how blockchain payments can bypass multi-day banking delays, even as it raised new AML and compliance considerations.

Bitcoin’s Integration Into Regulated Finance

January also highlighted Bitcoin’s continued integration into regulated financial products. Delaware Life launched a Bitcoin-linked fixed indexed annuity using BlackRock’s iShares Bitcoin Trust, bringing digital asset exposure into state-regulated retirement products with principal protection. UBS announced plans to pilot Bitcoin and Ether trading for Swiss wealth clients, navigating Basel III constraints through third-party custody.

On a lighter note, Steak ’n Shake expanded its Bitcoin strategy by offering hourly employee bonuses paid in Bitcoin, underscoring how digital assets are intersecting with employment, tax, and wage law. Meanwhile, the Department of Justice reaffirmed that forfeited Bitcoin from the Samourai Wallet case would be held in a Strategic Bitcoin Reserve, establishing a new procedural baseline for criminal forfeiture.

AI Pressures the Legal and Compliance Stack

Beyond crypto itself, January made clear that artificial intelligence is reshaping the legal and compliance environment that supports digital asset markets. A Thomson Reuters report warned that generative AI could reduce billable legal tasks by more than 50 percent, accelerating a shift away from hourly billing toward value-based pricing.

Regulators also moved aggressively. California’s attorney general ordered xAI to cease enabling sexualized deepfakes, signaling that state consumer protection laws will be used to police AI outputs ahead of comprehensive federal legislation. Courts limited discovery in AI copyright litigation involving OpenAI and reaffirmed that AI-generated works lack copyright protection without human authorship—developments with significant implications for Web3 projects relying on generative tools.

Thanks for Reading

That’s it for this January edition of The Block & Order Brief. Stay tuned for more insights from Moish Peltz, Kyle Lawrence, and their guests as Block & Order continues to track how digital assets move from experimentation to durable financial infrastructure.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.