With the passage of the GENIUS Act and growing momentum behind the CLARITY bills in Congress, regulatory clarity for digital assets is finally within reach—delivering the legal framework the crypto industry long demanded. But as that clarity arrives, are crypto incumbents the real winners?
For years, the dominant narrative from the crypto industry was that unclear regulation and enforcement would straitjacket the industry in the world’s largest economy. It did. Lawsuits crippled startups. Capital left the U.S. Talent flowed abroad.
One group suffered most of all: the country’s more than 3,300 U.S. broker-dealers. Bound by federal laws, broker-dealers were forced to sit on the sidelines as billions of dollars flowed into crypto that would otherwise be theirs. Retail investors funded the rapid expansion of Coinbase, Robinhood, and other fintech firms happy to capitalize on demand.
Crypto grew in four of the last five years–the only blemish being 2022, marred by the FTX implosion. At the same time, the U.S. brokerage industry sat idle, awaiting guidance on how to issue, trade, and custody these assets.
The lack of regulatory clarity didn’t block crypto–it handed the crypto industry a multi-year head start in capturing market share and building brand loyalty. But as regulatory clarity sharpens, does Wall Street have a second-mover advantage in digital assets?
The path is becoming clearer. In July, SEC Commissioner Hester Peirce said tokenized stocks are securities and must comply with federal securities laws. Her statement followed Robinhood’s tokenized stock launch in the EU and sent a direct message: any tokenized securities products in the U.S. are subject to federal securities laws.
This statement, in line with the SEC’s previous guidance on U.S. capital markets modernization, levels the playing field for both incumbents and disruptors by signaling there will be no circumvention of federal securities laws. Traditional finance and crypto are now on equal footing.
Wall Street has moved quickly to offer digital asset products of their own. More than $170 billion in assets flowed into 105 crypto ETFs traded in U.S. markets, with BlackRock and Fidelity amassing more than $100 billion. Large banks–headlined most recently by Citigroup and JPMorgan–are launching stablecoins to ensure payments run over their rails. And it’s not just the largest banks: financial technology giant Fiserv will supply regional banks with its new stablecoin, FIUSD.
New avenues are providing both retail and institutional investors with opportunities to enter the market. Broker-dealers can offer clients direct exposure to digital assets through a correspondent clearing special purpose broker-dealer without overhauling their infrastructure or applying for new licenses. This opens the door for E-Trade, Merrill Edge, Fidelity, and others to meet client demand for digital assets while staying squarely within the boundaries of U.S. law.
Internationally, the trend is also clear. Recently, Standard Chartered became the first global systemically important bank to launch a spot crypto trading desk, offering Bitcoin and Ether to institutional clients.
Ironically, it’s now the legacy crypto firms that are racing to embrace the regulated model they once sought to bypass. Firms are acquiring SEC-registered broker-dealers, seeking FINRA membership, and applying for bank charters to extend their offerings into brokerage and banking accounts.
SEC Chairman Paul Atkins said in May that “securities are increasingly migrating from traditional (or “off-chain”) databases to blockchain-based (or “on-chain”) ledger systems.” His priorities are to “develop a rational regulatory framework for crypto asset markets that establishes clear rules of the road for the issuance, custody, and trading of crypto assets.”
Atkins’ vision for integrating blockchain into existing market infrastructure underscores a fundamental truth: the path forward is not about creating parallel systems, but about upgrading the existing one. This favors firms already steeped in compliance, operations, and investor protections. U.S. broker-dealers can immediately benefit from this given the introduction of correspondent clearing, adherence to existing compliance structures, large customer base, and operational scale.
Beyond broker-dealers, the opportunity is now for Wall Street to lead the development of digital markets in the U.S. and cement the country’s position as the global leader in capital formation, market integrity, and financial innovation. Wall Street has the infrastructure, regulatory clarity is taking shape, and investor demand is there. The question now is who will lead the next chapter.
