MUNG Legal | December 2025 Newsletter

Digital Assets, AI, and Cross-Border Disputes — What moved in December, and what to watch in 2026

December closed with a clear signal: the next phase of digital assets is being shaped less by “new coins” and more by (i) stablecoins as payments infrastructure, (ii) tokenization entering regulated market plumbing, and (iii) AI governance becoming operational—especially for financial institutions and high-risk deployment contexts. The practical implication for founders, exchanges, funds, and corporates is that product design and compliance architecture are converging.

Market narrative for 2026: stablecoins + tokenization +“agentic” AI

Two widely shared year-end themes were (a) stablecoins moving into everyday payment rails and (b) tokenization becoming the next adoption cycle, alongside a push to operationalize AI (especially agents) rather than merely “talk about it.”

What this means legally

• Stablecoins: Expect greater scrutiny on reserves, issuance/licensing perimeter, and AML/CFT controls—especially around customer identification and cross-border distribution.

• Tokenization: The legal work shifts to enforceability, custody/segregation, investor disclosures, and whether tokenized interests map to securities/funds/payment instruments under local regimes.

• AI agents: Increased attention on accountability, auditability, and risk ownership when “autonomous” tooling triggers decisions (trading, onboarding, credit, fraud ops, customer comms).

  
  

Regulation: implementation is the story (not just legislation)

A recurring regulatory theme is that major frameworks are now in roll-out, which creates friction and divergence in how rules land across markets.

Europe: MiCA “fully effective,” but uneven in practice

MiCA took full effect at the start of 2025, but implementation has been patchy, with ongoing questions—particularly around stablecoins and how MiCA interacts with adjacent payments/investment rules.

United States: tokenized collateral and stablecoins enter derivatives markets

On 8 December 2025, the CFTC issued no-action relief allowing certain FCMs to accept payment stablecoins (and BTC/ETH) as customer margin collateral subject to conditions, and announced a pilot program plus guidance on tokenized collateral.

Practical takeaway: If you operate a trading venue, brokerage, fund, or derivatives-adjacent product, collateral policy + custody controls + disclosure are now strategic differentiators, not back-office items.

Hong Kong and China: stablecoin momentum meets “red lines”

Hong Kong’s stablecoin regime is already in force: since 1 August 2025, issuing fiat-referenced stablecoins is a regulated activity requiring a licence; as of the HKMA’s page update, there were no licensed stablecoin issuers yet.

Meanwhile, Reuters reported that on 1 December 2025, Hong Kong crypto-related stocks fell after the PBOC flagged renewed concerns about stablecoins and emphasized AML/CFT and customer identification issues—highlighting that “policy ambiguity” can close quickly.

What this means for operators

• If your model relies on Hong Kong licensing or market access, plan for enhanced China-sensitivity (messaging, counterparties, distribution, and compliance posture).

• AML/CFT design—especially KYC/KYB, transaction monitoring, sanctions screening, and Travel Rule readiness—should be treated as go-to-market gating, not a post-launch task.

  
  

Tokenization: the numbers are still small, but the curve is meaningful

Tokenized money market fund AUM (U.S. Treasuries) rose above US$8B in December 2025, while tokenized commodities (e.g., gold) climbed above US$3.5B—still tiny relative to global markets, but rapidly growing.

A parallel industry view is that political support is rising faster than detailed regulatory clarity, but activity is “trickling through” via pilots and incremental supervisory guidance.

Legal work that is increasingly “in scope”

• Token holder rights and legal enforceability (especially insolvency remoteness and waterfall mechanics)

• Custody/segregation and control frameworks (on-chain/off-chain interfaces)

• Offering materials, risk disclosures, and classification (security/fund interest/payment instrument)

• Cross-border distribution and marketing restrictions

  
  

AI governance in December: a shift toward standards, pre-emption, and sector rules

EU: standards and possible timing adjustments

Reuters reported a Commission proposal to delay stricter “high-risk” AI rules to December 2027 (from August 2026) under a “Digital Omnibus” package. Separately, the Commission’s AI Act standardisation page outlines how harmonised standards are being developed (risk management, data governance, transparency, human oversight, robustness, cybersecurity, conformity assessment), and notes a proposal linking applicability of high-risk rules to availability of support tools/standards.

US: federal posture against fragmented state regimes (reported)

A December legal update summarized an Executive Order (11 December 2025) emphasizing concerns about fragmented state-level AI laws and indicating an intent to pursue a minimally burdensome national standard while maintaining safeguards (e.g., child protection, free expression, copyright).

Singapore: AI risk management expectations for FIs (proposed)

A Singapore-focused legal update summarized MAS’ proposed AI Risk Management Guidelines (consultation ending 31 January 2026), covering governance, systems/policies, lifecycle controls, and capabilities/capacity, applying proportionately across financial institutions.

What to do now (boards, founders, compliance leads)

• Assign clear AI accountability (board/senior management oversight) and maintain an AI inventory.

• Implement lifecycle controls: model risk assessment, testing, monitoring, incident response, vendor governance.

• Prepare for content transparency/labeling expectations in key markets, and document how your model usage meets sector standards.

  
  

Disputes: China's "new game plan" for cross-border arbitration

China’s evolving approach to cross-border dispute resolution through case studies and commentary around China’s new Arbitration Law, passed on 12 September 2025 and set to take effect 1 March 2026, with emphasis on foreign-related arbitration and greater internationalisation.

Client implication: For contracts touching PRC counterparties, assets, or performance, revisit:

• arbitration seat/institution clauses, language, interim relief, evidence rules

• enforcement pathways and practical recovery strategy (especially where parallel proceedings are likely)

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Suggested Q1 2026 client checklist (practical and high-impact)

1. Stablecoin perimeter mapping: licensing triggers, marketing restrictions, reserve/attestation posture, AML/CFT controls.

2. Tokenization readiness: custody/segregation, legal enforceability, disclosures, cross-border offering compliance.

3. AI governance: inventory, risk tiering, lifecycle controls, vendor governance, and documentation defensibility.

4. Dispute strategy refresh for PRC-linked matters ahead of March 2026 effectiveness.

5. Derivatives/collateral strategy: evaluate whether tokenized collateral or stablecoin margin acceptance is relevant to your roadmap and counterparties

   
   

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Thank you for reading the December 2025 edition of Mung Legal Insights. For bespoke briefings on crypto-asset regulation, AI infrastructure contracts, or China’s AI governance landscape, contact us at info@munglegal.com.

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