US capital markets are the envy of the world: deep, liquid, transparent, and fair. But legacy infrastructure is starting to show its age. Clearinghouses, transfer agents, and other intermediaries introduce friction and cost at every step, in the face of new technology that can make our markets faster, cheaper, and more accessible.
Wall Street is already embracing blockchain technology. Tokenized Treasury bills, which are digital representations of government debt issued on public blockchains, have grown into a $1 billion market almost overnight, major asset managers are piloting blockchain-based funds, and global banks are experimenting with tokenized collateral and intraday repo.
These aren’t speculative bets; rather, they’re efficiency plays that reduce settlement times, cut counterparty risk, and broaden investor access.
The Securities and Exchange Commission is taking notice. SEC Chair Paul Atkins recently announced an agency-wide effort to modernize the securities markets using blockchain, including decentralized finance tools such as automated market-makers. The question is no longer whether securities will migrate on-chain, but how US regulators will steer the transition.
The core challenge is that today’s rules were written for a different era. Under current securities law, the issuance of stock requires a transfer agent, custody must be with a “qualified custodian,” and trading must occur through a broker on a registered exchange or alternative trading system.
These requirements assume a world in which humans or centralized actors intermediate every step, but on-chain systems invert that logic. Smart contracts can issue shares, crypto wallets can hold them, and peer-to-peer protocols can execute trades. The policy goals of fairness, transparency, investor protection remain important, but the mechanisms and tools are different.
Take custody. In traditional finance, qualified custodians such as State Street or BNY Mellon safeguard assets in omnibus accounts, and investor protections revolve around preventing theft or misuse of client funds. On-chain, custody is dictated by cryptographic keys — whoever controls the private key controls the asset.
This may sound precarious, but enforcing this through programmable smart contracts like vaults can offer stronger protections such as multi-signature approvals, time locks, audit trails, and embedded compliance checks. Regulators should recognize these as functional equivalents to qualified custodians, rather than trying to force digital assets into legacy structures.
When it comes to trading, at the core of today’s securities market structure sits Regulation National Market System: the 2005 framework that governs US equity markets, designed to knit together fragmented venues through order protection, best execution, and consolidated market data. It presumes the presence of brokers, exchanges, and clearinghouses.
In decentralized finance, none of these forms exist. Instead, liquidity pools and automated market makers execute trades directly and instantaneously on-chain, and validators and block builders decide which transactions are included and in what order, making them the de facto “matching engines” of this new market structure. If they are performing the same function, regulators should hold them to comparable standards of fairness and non-discrimination, but not in a way that only makes sense for centralized intermediaries.
As another example, critics worry that decentralized markets are rife with manipulation, and they have a point. A phenomenon known as “maximal extractable value” allows insiders to front-run or reorder transactions, extracting profits from ordinary investors.
Instead of ignoring this reality, policymakers could approach MEV the way they treated payment-for-order-flow in equities: as a structural conflict that requires transparency and guardrails. Industry-led solutions such as batch auctions, encrypted order flow, and neutral sequencing infrastructure can reduce MEV abuses while preserving efficiency, and regulators should encourage their development and adoption instead of banning the technology outright.
The benefits of getting this right are enormous. Tokenized issuance could allow smaller companies to raise capital globally at lower cost; on-chain custody could reduce reliance on centralized intermediaries and give investors more direct participation and control; decentralized trading could operate 24/7 with instant settlement, improving liquidity and resilience. And programmable compliance, such as embedding disclosures, transfer restrictions, and auditability directly into tokens or smart contracts themselves, could lower compliance costs while strengthening investor protection and regulatory oversight across the board.
So, what should US regulators do?
First, regulate by function, not form. If a crypto wallet or aggregator routes orders, it should be held to best execution standards. If a sequencer determines transaction ordering, it should follow fair-access rules. If an oracle disseminates price data, it should meet transparency and integrity requirements. The forms may look different, but the economic roles are similar. Market-led solutions are already being developed to build fairness directly into on-chain architecture, in some cases surpassing what’s possible with legacy regimes.
Second, recognize crypto-native safeguards. Smart-contract vaults, MPC custody, and compliance-encoded tokens are ways to leverage the technology itself to achieve compliance. Regulators should certify or set standards for these technologies rather than dismissing them.
Third, support public infrastructure. Much of on-chain market integrity will depend on open-source relayers, neutral block builders, and reliable oracle networks. These are public goods. They need oversight, but they also need support, from public funding to safe-harbor frameworks, that encourage experimentation without fear of retroactive liability.
Finally, tailor rules for risk. A meme coin doesn’t pose the same systemic risk as a tokenized equity or Treasury. Regulators should prioritize higher standards for protocols handling securities and certain real-world assets, while allowing general-purpose DeFi to innovate under baseline principles.
Securities markets have always evolved — from paper certificates to electronic ledgers, from trading floors to electronic networks. At its best, the SEC has adapted and facilitated the modernization of our markets. Blockchain is simply the next chapter in this evolution.
The key is to preserve what makes our capital markets the envy of the world — fairness, transparency, investor protection — while crafting a regulatory framework that makes sense for and leverages the unique capabilities of blockchain technology. Only then will the next generation of capital markets preserve America’s competitive edge while living up to blockchain’s promise of a more open, efficient, and inclusive financial system.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Tuongvy Le is general counsel of Veda Tech Labs and has held senior legal and policy roles across the digital asset industry, including at Anchorage and Bain Capital Crypto.
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