Tokenisation Rules Divide Wall Street and Crypto Leaders

Tokenisation Moves From Concept to Core Market Strategy

Tokenisation the process of converting traditional financial assets into blockchain-based digital tokens has rapidly moved into the mainstream. Banks, asset managers, and fintech firms are increasingly experimenting with tokenised bonds, equities, and funds as they seek faster settlement, lower operating costs, and 24/7 trading capabilities. As adoption accelerates, regulators are under pressure to clarify how these digital assets should fit within U.S. financial law.

Wall Street Pushes for a Traditional Oversight Model

Large financial institutions argue that tokenised assets should be governed under the same regulatory standards that apply to conventional securities. Their position is that investor protection, market transparency, and strict oversight of intermediaries remain essential regardless of technological innovations like blockchain. Many traditional firms believe that existing rules can adapt to tokenisation without sacrificing market stability.

Crypto and DeFi Leaders Warn Against Over-Regulation

Crypto innovators, especially those building decentralised finance (DeFi) platforms, contend that applying legacy securities rules too rigidly could stifle innovation. They note that blockchain enables peer-to-peer transactions without intermediaries, making certain traditional regulatory assumptions outdated. Treating open-source developers or automated smart contracts as financial middlemen, they argue, would not only be inaccurate but could also push innovation away from the United States.

A Flashpoint: How to Regulate Tokenised Trading on DeFi Platforms

The biggest disagreement centers on whether DeFi platforms trading tokenised assets should face the same rules as traditional exchanges and broker-dealers. Some market-making firms have urged the SEC to impose full identification and regulatory oversight of any intermediaries involved when tokenised U.S. assets are traded on decentralised networks. DeFi advocates counter that such rules conflict with the nature of decentralisation and effectively target the technology itself.

Divergent Views Inside the SEC

Even within the SEC, there is no unanimous stance. Some commissioners emphasise that tokenised securities remain securities, regardless of the technology used, and must stay under traditional investor-protection frameworks. Others acknowledge that blockchain offers new efficiencies and more direct issuer–investor interactions that current rules did not anticipate. Ongoing initiatives such as discussions around a national token taxonomy suggest the SEC is actively exploring more modernised approaches.

The Future of Tokenised Markets Depends on SEC Clarity

The central question remains unresolved: Should tokenisation be folded into the current, heavily intermediated market structure, or should regulators allow a new, decentralised model to emerge? The SEC’s upcoming guidance will determine whether tokenised assets evolve under traditional Wall Street frameworks, thrive on decentralised platforms, or develop through a hybrid model that blends both.

FAQs

Q1. What is tokenisation in financial markets?

Tokenisation converts ownership of traditional assets such as stocks, bonds, or real estate into digital tokens recorded on a blockchain. These tokens can then be traded or transferred with greater speed, efficiency, and transparency.

Q2. Why are Wall Street firms concerned about tokenisation regulation?

Wall Street firms want tokenised assets to follow existing securities laws to maintain investor protection, prevent fraud, and preserve fair, liquid markets. They believe blockchain should enhance current systems, not bypass them.

Q3. Why do crypto and DeFi leaders oppose applying traditional rules?

Crypto advocates argue that decentralised protocols operate differently from traditional financial intermediaries. Applying old rules to software-based systems, they say, could hinder innovation and force emerging technologies offshore.

Q4. What could the SEC’s future rules mean for tokenisation?

The SEC is evaluating how tokenised assets fit into U.S. securities law. Future frameworks may define how companies issue, trade, store, and report tokenised financial instruments, shaping the next era of digital markets.