Author: Nancy, PANews
Tokenized assets (RWA) are sparking a global trend of going on-chain. The influx of funds and the enrichment of assets have rapidly transformed this on-chain movement from a crypto-native testing ground into a new battleground for Wall Street.
While the RWA (Real Money Exploitation) sector is developing rapidly, there are differences between TradeFi (traditional finance) and Crypto. On one hand, Wall Street is more concerned about regulatory arbitrage and systemic risks, emphasizing stability and order; on the other hand, the crypto industry pursues innovation speed and decentralization, worrying that existing frameworks will limit its development.
Several months ago, the SEC announced plans to introduce a package of exemptions for crypto innovations, scheduled to take effect in January of this year. However, this pro-crypto radical policy naturally met with strong opposition from Wall Street.
Crypto exemptions are being besieged by Wall Street
This week, JPMorgan Chase, Citadel, and SIFMA (Securities Industry and Financial Markets Association) held a closed-door meeting with the SEC's crypto working group. At the meeting, these Wall Street representatives explicitly opposed granting broad regulatory exemptions to tokenized securities and argued that the existing federal securities law framework should apply.
These financial institutions have issued a stern warning regarding the SEC's attempt to grant the green light to tokenized assets through regulatory shortcuts, arguing that this could harm the overall U.S. economy. They recommend that regulators implement strict, thorough oversight rather than simply granting exemptions. Even if any exemptions exist for innovation, they must be narrow-minded, based on rigorous economic analysis, and have strict safeguards; they must never replace comprehensive rulemaking.
They further emphasized that regulatory treatment should be based on economic characteristics, rather than the technology or category label used (such as DeFi), and advocated the regulatory principle of "same business, same rules." They strongly opposed the establishment of dual regulatory standards, arguing that any broad exemptions that attempt to circumvent the long-term investor protection framework would not only weaken investor protection but also lead to market chaos and fragmentation.
The meeting also specifically mentioned the flash crash that occurred in October 2025 and the collapse of Stream Finance as cautionary tales, emphasizing that if tokenized securities are allowed to operate outside the protection of existing securities laws, the US financial market will face enormous systemic risks.
Meanwhile, Wall Street also expressed concern about the SEC's plan to exclude some DeFi projects from compliance obligations. SIFMA pointed out that many so-called DeFi protocols actually perform the core functions of brokers, exchanges, or clearinghouses, yet exist in a regulatory vacuum. The DeFi environment presents numerous unique technical risks, including predatory trading due to Maximum Extractable Value (MEV), flawed pricing mechanisms in Automated Market Makers (AMMs), and opaque conflicts of interest. However, DeFi was not the only focus of the conference; according to Decrypt, the main proponents of DeFi were unaware of the meeting.
In addition, the meeting also emphasized that wallet providers involved in tokenized asset activities must register as brokerage firms if they perform core brokerage business and earn trading-based revenue, and that a distinction must be made between non-custodial and custodial wallet models.
Ultimately, Wall Street's stance is very clear: embracing innovation does not mean starting from scratch. Rather than establishing a parallel, independent regulatory system, it's better to confine tokenized assets within the existing, mature compliance framework.
Tokenized products are fully incorporated into the regulatory scope of securities law and are divided into two categories.
Beyond regulatory issues, the legal status and applicable regulations for tokenized securities remain unclear. To address this, SEC Chairman Paul Atkins announced plans last November to establish a token taxonomy, based on the Howey test, to clarify which crypto assets constitute securities, thereby defining a clear regulatory framework for crypto assets.
On January 28, the SEC officially released guidance on tokenized securities, which aims to complement the market structure bill being pushed forward by U.S. lawmakers and provide a clearer regulatory path for market participants to conduct related business within a compliant framework.
The document explicitly states that whether securities are subject to regulation depends on their legal attributes and economic substance, not on whether they are tokenized. Tokenization itself does not change the scope of application of securities laws. In other words, simply putting assets on a blockchain or tokenizing them does not alter the scope of application of federal securities laws.
According to the SEC definition, tokenized securities are financial instruments that are presented in the form of crypto assets and whose ownership records are maintained, in whole or in part, through a crypto network.
The document categorizes tokenized securities models in the market into two core types: issuer-sponsored and third-party-sponsored, and clarifies the regulatory requirements for each.
The first category is the issuer-direct tokenization model: this refers to the issuer (or its agent) directly using blockchain technology to issue and record holder information, regardless of whether on-chain or off-chain recording is used. Such tokenized securities are subject to the same legal obligations as traditional securities, including registration and information disclosure.
The second category is the third-party tokenization model, which is divided into custodian type, where token holders enjoy indirect ownership of custodian securities through tokens; and synthetic type, which only tracks the price performance of the underlying security without transferring any substantial ownership or voting rights. Such products may constitute security swaps.
The document emphasizes the potential risks of third-party tokenized products, pointing out that this model can generate additional counterparty risk and bankruptcy risk, and that some products are subject to stricter securities swap regulations.
The SEC also stated that "the door is open" and that it is ready to actively communicate with market participants on specific compliance paths to assist companies in conducting innovative business within the framework of federal securities laws.
With the SEC imposing more detailed regulations on RWA, the risk of regulatory arbitrage will be significantly reduced, paving the way for more traditional institutions to enter the market.
