Web3 Wavefronts - Digestible News on Crypto, DeFi and AI

Federal authorities and international partners dismantled E Note and seized production servers, prior server copies, full customer and transaction databases, mobile applications, and domains including e-note.com, e-note.ws, and jabb.mn, along with full ledgers, message logs, and service notes tied to more than $70 million in alleged laundering since 2017. The U.S. Attorney’s Office for the Eastern District of Michigan unsealed an indictment naming Russian national Mykhalio Petrovich Chudnovets as the alleged operator and charging him with money laundering conspiracy carrying a statutory maximum penalty of 20 years in prison. The FBI led the operation with assistance from the U.S. Attorney’s Office in Michigan, the German Federal Criminal Police Office, the Finnish National Bureau of Investigation, Michigan State Police, and the Michigan Cyber Command Center. Investigators prioritized cutting off live service, preserving logs and identifiers, and collecting historical artifacts to enable reconstruction of fund flow paths across wallets, intermediaries, and cashout partners and to support tracing, arrests, and asset recovery. Authorities allege E Note operated from 2011 through 2025, combined automated exchange workflows with hands-on brokering and a help desk to move funds quickly with limited customer screening, and facilitated fast conversions and brokered liquidity used by ransomware affiliates and other illicit actors. Recommended mitigation steps presented include confirming licensing and registration for fiat and crypto ramps, strengthening KYC and sanctions screening, implementing on-chain and off-chain transaction monitoring and wallet screening, and preparing playbooks for rapid legal response, data preservation, and cooperation with law enforcement. Source: https://web3businessnews.com/crypto/fbi-dismantles-e-note-exchange/

Sterling Heights will vote on January 6, 2026, on a proposed ordinance that would establish a two-tier licensing framework and operational rules for virtual currency machines. The ordinance would require new installs to obtain a host endorsement tied to the physical business location and a separate operator license issued by the City Clerk, with annual renewals and fees set through the city's appropriations process. Existing machines and operators would have to comply by March 31, 2026. Required operational standards would mandate photo ID checks at machines, prominent fraud warnings and consumer disclosures displayed on or near kiosks, printed receipts for every transaction containing date, amount, and a machine identifier, and a live customer service phone line maintained by operators. The proposal would introduce transaction controls including lower initial limits for first-time users, with local reporting citing an example cap near $1,000 per 24 hours for new users and final numeric caps to be set in the ordinance and administrative rules. Enforcement and oversight would be shared between the City Clerk and the Police Department, and violations could lead to suspension or revocation of host endorsements and operator licenses, with inspections, documentation checks, and requirements to produce records tying transactions to receipts and customer service interactions. The policy response follows 23 local cases this year linked to cryptocurrency machines with reported losses exceeding $500,000 and seniors disproportionately affected. Host businesses would have to hold an active city business license and obtain a machine-specific endorsement, and operators would have to implement or update KYC workflows to support photo ID checks, install signage and receipt mechanisms, staff or contract a live customer support line, and budget for application and renewal fees. The City Council could amend fee levels, first-time limits, and enforcement triggers during the council process, and other Michigan municipalities may consider adopting similar frameworks in 2026. Source: https://web3businessnews.com/policy/sterling-heights-crypto-atm-rules/

Show description: Bhutan announced an upper limit allocation of 10,000 bitcoin from sovereign reserves to finance Gelephu Mindfulness City, a planned special administrative region near the Indian border focused on mindfulness, sustainability, and innovation. The allocation was valued at roughly $860 million to $1 billion depending on bitcoin market price at reporting. Bhutan accumulated its bitcoin reserves through state-backed mining using hydropower since 2021, with state entities such as Druk Holding and Investments participating. The financing plan prioritizes collateralized and yield-managed structures over spot sales and identifies preferred mechanisms including secured credit lines collateralized by BTC, stablecoin liquidity facilities, and programmatic yield strategies sized to limit drawdown and avoid forced liquidations. Project design pairs physical infrastructure with tokenization and digital policy, including issuance of a gold-linked sovereign token called TER on Solana and preparatory legal and digital identity frameworks for the Gelephu zone. Gelephu is being positioned to attract investment in fintech sandboxes, green data centers, healthcare and agricultural pilots, and tourism, with a governance model that includes a regulatory perimeter, a governing board, an appointed governor, and a city-level master plan with digital identity and compliance layers. Officials and market participants identified financing terms, counterparty selection criteria, independent audits of sovereign crypto reserves, and final statutory texts as near-term disclosure items that will affect investor appetite and funding costs. Key risks cited include bitcoin price volatility affecting collateral ratios and financing costs, governance gaps or limited disclosure increasing sovereign balance-sheet risk, and execution delays similar to past bitcoin-city proposals. Near-term milestones include publication of financing term sheets and reserve transparency reports, finalization of regulatory statutes and governing board appointments, confirmation of the governor, utility and site-level buildout, timelines for pilot data centers and green mining deployments, partner roster announcements, and independent audits. Guidance for founders and corporate treasury teams includes monitoring collateral frameworks and disclosure schedules, aligning offerings with stated sector priorities such as fintech infrastructure and green data centers paired with efficient mining or cloud services, and preparing for partnership models involving blended public-private financing, tokenized instruments, and compliance tied to a digital identity layer. Source: https://web3businessnews.com/crypto/bhutan-10000-btc-mindfulness-city/

Show description: On December 17, Coinbase announced it will add equities trading to its core app and web experience, integrate Kalshi-powered prediction markets, and brand the initiative Everything Exchange; the company will let users manage stocks alongside bitcoin, ether, stablecoins, and other tokens in a single account and interface. Funding and settlement rails will tie into users' crypto wallets and the platform will support buying stocks with USDC, while Coinbase will provide unified balances, a single identity, and a consistent order entry experience across asset classes. Kalshi-powered event contracts will provide regulated exposure to outcomes such as economic indicators, interest rate decisions, and election timelines within the same account used for crypto and equities. Coinbase signaled a roadmap that includes tokenized stocks and a single onboarding flow with consolidated rails. The company said the changes can expand investable options, streamline treasury and portfolio allocations, enable stock funding with stablecoins, and add nearer-term hedging and price-discovery instruments for crypto-exposed positions. Coinbase identified execution risks including integration of balances, collateral, and real-time risk across asset classes; liquidity depth and fee competitiveness; system reliability under mixed workloads; and regulatory compliance for event contracts and any tokenized or synthetic equities. Stakeholders should monitor regional rollouts, asset coverage cadence, how USDC and other stablecoins are treated for collateral and settlement, initial liquidity and fee structures, institution-grade workflows and custody integrations, partner expansion beyond Kalshi, and regulatory signals on tokenized equities and event markets. Coinbase said the move broadens its addressable revenue across trading, custody, payments, data, and financing and positions the firm as an access layer for multiple asset classes. Source: https://web3businessnews.com/crypto/coinbase-stocks-prediction-markets/

Show description: Lincoln, Nebraska added Chapter 9.70 to the city code requiring a standardized Lincoln Police Department warning to be posted at the point of transaction on every crypto and Bitcoin ATM within city limits. The ordinance responds to reported losses exceeding $11,000,000 in the first eleven months of 2025. The rule defines crypto and Bitcoin ATMs and assigns shared responsibility to host businesses and device operators to display the notice where plainly seen during transactions and not obscured. The City Council passed the ordinance unanimously in November 2025 and set a compliance deadline of December 24, 2025. City staff will verify notice presence and legibility during routine checks and will enforce missing or obscured labels consistent with municipal code practices. The Lincoln Police Department and AARP Nebraska are conducting an education and labeling campaign, and volunteers and LPD staff began placing standardized warning stickers on kiosks across the city in December 2025. The LPD guidance lists common scam scripts including imposter schemes claiming overdue taxes, frozen bank accounts, or emergencies involving relatives and instructs consumers that no government agency, bank, or legitimate business requests payment in cryptocurrency or gift cards. LPD’s Technical Investigations Unit currently includes one sergeant and four investigators focused on tracing funds, preserving surveillance and ATM logs, and coordinating with platforms and exchanges, and an additional investigator will join in January 2026. Operators must also comply with Nebraska Department of Banking and Finance oversight and with the Controllable Electronic Record Fraud Prevention Act (LB609), effective September 2025, which added disclosures, transaction limits, holds, and defined refund rights in covered cases. Operators and hosts are instructed to inventory all Lincoln machines, obtain the official LPD written warning, post it on every machine by December 24, 2025, train field technicians and store staff to maintain visible and legible warnings, implement periodic audits with photo verification and maintenance logs, and retain records of inspections and installations. Consumers are directed to stop transactions if pressured to pay in crypto, verify requests with trusted sources before sending funds, and report suspected fraud to local police, the FBI, the FTC, and the National Elder Fraud Hotline. The ordinance does not ban crypto ATMs; machines may continue to operate if they meet the city posting requirement and applicable state rules. City officials expect continued municipal scrutiny as investigative capacity and outreach expand and expect state-level rules like LB609 to influence refund and reporting processes. Source: https://web3businessnews.com/policy/lincoln-crypto-atm-warnings/

Show description: A post-election change in Washington correlated with reduced regulatory pressure on Crypto.com, and the SEC closed its investigation by late March without recommending an enforcement action. Reporting and company statements connected the decline in enforcement risk to shifting agency priorities after the 2024 election. Public disclosures show President Trump held more than $1 million in Ethereum, received up to $1 million in NFT revenue, accepted a multi‑million‑dollar MAGA‑themed token gift, and his campaign accepted more than $25 million in crypto donations during 2024. The administration announced policies to make the United States a crypto capital, refrain from selling government Bitcoin reserves, support domestic mining, and appoint leaders to coordinate cross‑agency policy on digital assets and AI. Market participants interpreted these developments as indicating a shift toward negotiated outcomes, guidance, and settlements rather than aggressive litigation, which can reprice enforcement exposure for founders, CEOs, and investors. Practical implications include potential shifts in enforcement discretion and settlement posture; greater importance of senior agency appointments for custody rules, exchange registration, token listings, stablecoin frameworks, and staking and market‑structure regulation; and the role of timing and transparency in shaping market reactions and concerns about conflicts and market integrity. Early signals to monitor include senior appointments and advisory roles, campaign finance and inaugural committee filings, public visitor logs showing meetings between officials and industry actors, investigation and settlement outcomes, staff legal bulletins, and any formal guidance linking surveillance sharing to spot listing approvals. Operational actions advised for teams include strengthening compliance readiness, segregating custody, documenting controls for staking and token handling, formalizing AML programs, hedging jurisdictional exposure, maintaining disclosures and governance, and engaging with rulemaking processes while pressing for transparent safeguards. Policy risk now includes both reduced enforcement exposure in some cases and increased reputational and integrity risks when private interests and public policy intersect, creating the potential for faster approvals alongside elevated scrutiny if transactions or personnel raise conflict concerns. Source: https://web3businessnews.com/policy/trump-cryptocom-conflict-risks/

Show description: Investigators follow crypto money trails through mixers, coinjoin aggregation, privacy coins, OTC desks, unlicensed venues, peer‑to‑peer channels, cash OTC deals, and cross‑chain bridges to trace illicit flows and pursue seizures. They convert on‑chain transactions into paths, clusters, and risk scores using graphing, heuristics, clustering, change‑address detection, peel‑chain analysis, fee and script fingerprinting, and triage systems that prioritize flows by speed, fragmentation, and contact with labeled entities. Analysts label clusters with commercial and open datasets, court records, and voluntary disclosures, issue real‑time alerts when risky flows hit monitored deposit addresses or exchanges, and link cross‑chain events by matching bridge deposits with mints, correlating swap quotes with contract events, and using mempool and validator logs for timing anchors. Authorities and analysts obtain KYC files, IP logs, login metadata, device fingerprints, and transaction histories via FIU reports, SARs, subpoenas, and cooperation with exchanges and banks to corroborate on‑chain hypotheses and enable freezes, account holds, recoveries, arrests, and asset seizures when legal thresholds are met. Case systems preserve provenance by recording labels, tool versions, and analyst notes, analysts perform peer review of cluster logic, and teams pre‑stage legal templates, exchange contact lists, and runbooks to shorten time from detection to action. Enforcement actions and international investigations that combine blockchain tracing with exchange records have led to arrests, fines, and asset seizures by linking wallets to individuals through consistent on‑chain patterns supplemented by off‑chain records. Firms implement KYC procedures, wallet screening tied to attribution datasets, real‑time alerts, incident response procedures for law enforcement requests, source‑of‑fund documentation, cross‑chain risk monitoring, and reproducible investigative outputs. Operational steps include instrumenting wallet onboarding with automated screening, logging and retaining transaction metadata and exportable case artifacts, pre‑staging legal and compliance playbooks with counsel and exchange contacts, training analysts on protocol mechanics and manual tracing, independently verifying tool outputs, and applying chain‑of‑custody practices. Authorities and firms plan broader adoption of cross‑chain analytics, expanded attribution data from compliant virtual asset service providers, and standardized legal requests to shorten time to freeze assets, and actors that trace across chains, coordinate internationally, and act quickly at compliant off‑ramps can match funds across ecosystems and execute freezes or recoveries when legal conditions are satisfied. Source: https://web3businessnews.com/crypto/follow-crypto-money-trails/

Show description: The government will introduce a bill this week to bring digital asset firms under financial services law and shift oversight from anti-money-laundering registration to Financial Conduct Authority supervision by October 2027. Lawmakers plan to finalize detailed rules by the end of 2026 and to run consultations through 2026 on trading venues, custody, stablecoin payments and related topics. The Financial Conduct Authority, working with HM Treasury, will extend governance, consumer protection, market conduct and operational resilience requirements that currently apply to banks, broker-dealers and payment firms to crypto exchanges, dealers and agents. The new framework will require formal authorization routes, fit and proper assessments for senior managers, prudential and conduct rulebooks, client asset protections, trade surveillance, incident reporting, and ongoing supervisory engagement. Custody providers will face segregation and reconciliation duties and market conduct rules will cover disclosures, order handling, conflicts of interest and pricing obligations. The Bank of England and the FCA will coordinate on stablecoin issuance and payment use while the Bank of England’s review will assess systemic risks, interoperability with payment systems, reserve composition and possible limits on certain wholesale uses or holdings. Supervision will include proactive supervisory cycles, thematic reviews and enforcement powers for market abuse, conduct failures and consumer redress, and regulators will be able to mandate skilled person reviews or other remediation. Firms should prepare gap assessments, authorization roadmaps, custody and reconciliation reviews, enhanced trade surveillance and incident reporting capabilities, and engagement with consultations; global firms should map the UK regime against other jurisdictions to identify licensing overlaps and gaps. Source: https://web3businessnews.com/policy/uk-crypto-regulation-2027-deadline/