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Author: Aaron Kaplan, Source: Coindesk, Compiled by: Shaw Bitchain Vision
With the passage of the GENIUS Act and the growing calls for Congress to push the CLARITY Act, regulatory clarity for digital assets is finally within reach—providing safeguards for the legal framework that the crypto industry has long demanded.But with this clarity coming, will existing companies in the crypto industry be the real winners?
The cryptocurrency industry has dominated for years is that unclear regulation and law enforcement will hinder the industry’s development in the world’s largest economy.This is indeed the case.Litigation has made it difficult for startups to take action.Funds leave the United States.Talent flows overseas.
The most affected are more than 3,300 brokerage dealers in the United States.Under federal law, these brokerage dealers can only watch billions of dollars in flow into the cryptocurrency sector that should have belonged to them.Retail investors have provided funding for the rapid expansion of fintech companies such as Coinbase and Robinhood, which are willing to profit from market demand.
Cryptocurrencies have been growing for four years in the past five years, with the only flaw being 2022, a year that was clouded by the collapse of FTX.Meanwhile, the U.S. brokerage industry has done nothing and has been waiting for guidance on how to issue, trade and host these assets.
Regulatory opacity has not hindered the development of cryptocurrencies—instead, it has given the cryptocurrency industry a years of leading edge in seizing market share and building brand loyalty.But with the increasing transparency of regulatory, does Wall Street have a latecomer advantage in the field of digital assets?
The path is becoming clearer.In July this year, the Securities and Exchange Commission (SEC) commissioner Hester Peirce said that tokenized stocks are securities and must comply with federal securities laws.After Robinhood launched tokenized stocks in the EU, she made the comments, which directly conveyed a message: Any tokenized securities product in the United States is subject to federal securities laws.
This statement is consistent with the SEC’s previous guidance on modernization of the U.S. capital market, which leveled the playing field for traditional financial institutions and emerging cryptocurrency companies by showing that they would not circumvent the federal securities laws.Traditional finance and cryptocurrencies are now on an equal footing.
Wall Street acted quickly and launched its own digital asset product.More than $170 billion of funds flowed into 105 cryptocurrency ETFs traded in the U.S. market, with BlackRock and Fidelity both having assets of more than $100 billion.Large banks — recently led by Citigroup and JPMorgan Chase — are launching stablecoins to ensure payments are made through their systems.And not just big banks, fintech giant Fiserv will offer regional banks its new stablecoin, FIUSD.
New ways provide retail and institutional investors with opportunities to enter the market.Brokers can provide clients with direct access to digital assets through agency clearing special purpose broker dealers without the need to undergo massive transformation of their infrastructure or apply for a new license.This opens the door for companies such as E-Trade, Merrill Edge, and Fidelity to meet customers’ demand for digital assets, while also fully complying with US laws.
From an international perspective, this trend is also very obvious.Recently, Standard Chartered Bank became the first global systemically important bank to set up a cryptocurrency spot trading counter, providing Bitcoin and Ethereum trading services to institutional customers.
Ironically, now old cryptocurrency companies are racing to adopt the regulated model they once tried to bypass.The companies are acquiring SEC-registered brokerage dealers, seeking to join the U.S. Financial Industry Regulatory Agency (FINRA) and apply for a banking license to expand their services to the brokerage and bank accounts sectors.
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 focus is to “develop a reasonable regulatory framework for the crypto asset market and establish clear rules for the issuance, custody and transaction of crypto assets.”
Atkins’ idea of integrating blockchain into existing market infrastructure highlights a basic fact: the future direction is not to create parallel systems, but to upgrade existing systems.This is beneficial to companies that have long been well versed in compliance, operations and investor protection.Brokerage dealers in the United States can benefit immediately given the introduction of agency clearing, following the existing compliance architecture, having a large customer base and operating scale.
In addition to brokerage and proprietorships, Wall Street now has the opportunity to lead the development of the US digital market and consolidate the US’s position as a leader in global capital formation, market integrity and financial innovation.Wall Street has infrastructure, regulatory frameworks are gradually becoming clearer, and investor demand exists.The question now is who will lead the next chapter.
