Wall Street goes on-chain: regulators greenlight crypto, banks race to tokenize everything

The regulatory landscape for blockchain and crypto in the U.S. underwent a dramatic transformation beginning in late 2025, as top financial regulators signaled a new era of openness and collaboration. The Federal Reserve, led by Vice Chair Michelle Bowman, made headlines with its first-ever participation in the crypto-focused SALT Conference, where Bowman publicly endorsed blockchain technology, tokenization, and stablecoins. This watershed moment was quickly followed by the SEC and CFTC's joint authorization of spot crypto trading on major exchanges like NYSE and NASDAQ, allowing for the listing and trading of Bitcoin, Ethereum, and other crypto assets. These moves not only reflected a coordinated regulatory shift but also laid the groundwork for integrating blockchain into the core of U.S. financial markets, expanding access and providing long-sought regulatory clarity.

This regulatory thaw was mirrored by a flurry of legislative and agency actions designed to foster innovation while maintaining market integrity. The rollback of restrictive measures such as Operation Chokepoint 2.0, the passage of the Genius Act and the Clarity Act in the House, and bipartisan efforts in the Senate all contributed to a more innovation-friendly environment. Major banks—including JPMorgan, Citibank, and US Bank Corp—swiftly resumed crypto custody and trading services, often partnering with fintechs like NIDIC, while the SEC and OCC issued new guidance to modernize broker-dealer rules and clarify stablecoin treatment. As SEC Chair Paul Atkins put it, the focus shifted to giving market participants 'freedom to choose their trading venues,' and CFTC Acting Chair Caroline Pham underscored the regulatory embrace of innovation, signaling a decisive break from the previous administration’s adversarial stance toward crypto.

Despite this momentum, the evolution of regulatory frameworks remains a work in progress, with ongoing debates over issues such as stablecoin yield, capital requirements, and the precise classification of digital assets. The OCC’s ban on stablecoin yield, for instance, sparked industry debate about fairness and innovation, reflecting persistent tensions between banks and crypto platforms. Meanwhile, punitive Basel capital rules continue to limit liquidity and institutional participation, though there is growing optimism that U.S. banking regulators will soon adjust capital treatment for stablecoins backed by safe assets like T-bills. As bipartisan negotiations continue in Congress and among regulators, the overarching goal is to establish a durable, balanced framework that can withstand political shifts and position the U.S. as a global leader in blockchain-powered finance.

Institutional adoption of blockchain, stablecoins, and tokenized assets has rapidly transformed financial market infrastructure, with major players like BlackRock, JPMorgan, Citi, and Coinbase leading the charge. In 2025 and early 2026, banks and asset managers moved beyond tentative pilots to launch fully integrated blockchain-based products and services—ranging from tokenized money market funds and stablecoin payment rails to 24/7 trading platforms and on-chain settlement solutions. This shift is exemplified by BlackRock’s $2.2 billion tokenized Treasury fund tradable on Uniswap, JPMorgan’s MONY fund on Ethereum, and Citi’s partnership with Coinbase for institutional stablecoin payments, all of which signal a decisive pivot from speculative crypto experiments to compliant, scalable infrastructure underpinning mainstream financial operations.

This wave of institutional participation has been catalyzed by regulatory breakthroughs such as the Genius Act and the Clarity Act, as well as pragmatic SEC policy shifts that have lowered barriers for banks and asset managers to enter the crypto space. Regulatory clarity has enabled the likes of US Bank Corp, JPMorgan, and Citibank to resume or expand crypto custody and trading services, while new frameworks around stablecoins and tokenized securities have encouraged innovation without sacrificing compliance. As SEC Chair Paul Atkins put it, the agency is now 'prioritizing innovation and embracing new technologies to enable this on-chain future,' a stance that has emboldened institutions to treat digital assets as strategic financial cornerstones rather than speculative side bets.

The maturation of market infrastructure is further evidenced by the convergence of traditional and crypto-native platforms, with exchanges like Coinbase evolving into 'everything exchanges' that integrate stocks, ETFs, derivatives, and prediction markets alongside digital assets. Infrastructure providers such as DTCC, Swift, and Quant Network are embedding blockchain into the core plumbing of financial markets, enabling atomic, real-time settlement and cross-border payments. Meanwhile, the rise of enterprise blockchains and scalable public networks like Ethereum, Solana, and Base is providing the technical backbone for institutions to operate at scale, with initiatives like the DTCC’s tokenized Treasuries on Canton and Swift’s blockchain-based payment rails marking a new era of interoperability and efficiency.

While institutional adoption is now the dominant force in crypto market liquidity and infrastructure development, the journey is ongoing, with persistent challenges around secondary liquidity, technical custody, and operational integration. Institutions are still navigating the complexities of DeFi, programmable money, and multi-chain deployments, but the trend is clear: as capital allocations to digital assets rise—projected to exceed 15% of institutional portfolios within three years—the lines between traditional finance and blockchain-based markets are rapidly blurring. The result is a financial ecosystem where programmable, 24/7, on-chain assets and payments are no longer futuristic concepts, but the new standard for global capital markets.

The tokenization of traditional assets marks a decisive shift from speculative crypto to blockchain-based issuance of real-world financial instruments, with Wall Street giants like BlackRock, JP Morgan, and Citi leading the charge. By late 2025 and early 2026, this movement has matured beyond early pilots, as evidenced by the NYSE and ICE’s push for 24/7 on-chain trading of U.S. equities and ETFs, and BlackRock’s $2.2 billion tokenized Treasury fund trading on Uniswap. This evolution is underpinned by regulatory breakthroughs—such as SEC pilot approvals and the anticipated Clarity Act—that are enabling programmable, always-on markets, where both retail and institutional investors can access, trade, and even use tokenized assets as collateral around the clock.

Programmability and composability are redefining what financial assets can do, as tokenized securities—whether equities, bonds, or commodities—become dynamic instruments that can serve multiple functions simultaneously. Platforms like Figure’s OPEN and BlackRock’s BUIDL demonstrate how tokenized shares can be used for instant settlement, lending, and even arbitrage, while programmable smart contracts automate dividends, governance, and collateralization. This flexibility is unlocking new financial products and use cases, from fractional ownership and custom funds to DeFi-native lending and 24/7 liquidity, with infrastructure providers like Securitize and Chainlink ensuring compliance and interoperability across multiple blockchains.

While the promise of tokenized, always-on markets is rapidly materializing, the landscape is still in its early innings, with approximately $35 billion in real-world assets tokenized—just a fraction of the global securities market. Early adoption has been strongest in tokenized Treasuries, money market funds, and gold, with platforms like Solana, Ethereum, and Provenance competing for market share and technical leadership. However, challenges persist: liquidity remains thin outside flagship products, regulatory frameworks are still evolving, and banks are asserting control through KYC requirements, all of which will shape the pace and structure of future growth as the market races toward a projected $2–10 trillion in tokenized assets by 2030.

The institutional embrace of tokenization is not only transforming trading hours but also the very infrastructure of capital markets, as legacy players like NYSE, DTCC, and LSEG invest in blockchain-based settlement, collateral, and custody solutions. These efforts are bridging the gap between traditional finance and DeFi, with partnerships spanning BNY Mellon, Citigroup, and Securitize, and new blockchains like LayerZero’s Zero and Canton targeting interoperability and compliance. As Michael Blaugrund of ICE puts it, the real revolution is in the collateral infrastructure that underpins programmable, always-on markets—a transformation that will ultimately allow investors to trade, lend, and settle assets instantly, anywhere in the world.

The competitive landscape between traditional finance (TradFi) and decentralized finance (DeFi) has evolved from wary observation to active convergence, as evidenced by major banks like JP Morgan, Citi, and BNY Mellon issuing tokenized deposits and launching blockchain-based products on platforms such as Base, Ethereum, and Solana. This strategic embrace of blockchain technology is not merely about keeping pace with fintechs and crypto-native firms like Coinbase and Kraken, but about preserving banks’ broader value proposition—offering credit risk management, compliance, and complex corporate services—while leveraging the programmability and efficiency of on-chain assets. As stablecoins, tokenized deposits, and CBDCs each carve out distinct roles—serving crypto-native trading, wholesale settlement, and corporate treasury needs respectively—the lines between TradFi and DeFi are blurring, with banks seeking to maintain their relevance by integrating blockchain rails into their core offerings.

By late 2025 and into 2026, the competitive dynamic has shifted from isolated pilots to a full-scale 'coopetition,' with strategic alliances like Citi-Coinbase, Kraken-Deutsche Börse, and ICE-OKX setting new industry standards for interoperability, liquidity, and institutional access. These collaborations are not only accelerating the modernization of legacy systems such as SWIFT and the NYSE, but also catalyzing the emergence of multi-chain platforms—exemplified by LayerZero, Solana, and Canton—that enable 24/7 trading, instant settlement, and seamless movement of tokenized assets across borders and asset classes. As regulatory clarity improves, with the SEC and OCC issuing pivotal guidance and global regulators following suit, both banks and crypto firms are racing to secure first-mover advantage in instant payments, stablecoin rails, and tokenized securities, making it increasingly difficult for late adopters to catch up.

However, this convergence is not without friction: regulatory debates over stablecoin yields, KYC requirements, and the role of deposit insurance are intensifying, as banks lobby for a 'level playing field' and regulators like the OCC move to ban yield on stablecoins to maintain parity with traditional savings products. Banks, whose business models rely on fractional reserve lending, are inherently conflicted with fully reserved stablecoins, prompting them to promote tokenized deposits as a compatible alternative, while crypto platforms continue to attract customers with higher yields and programmable features. The resulting tug-of-war is driving both sides to innovate—fintechs like Robinhood are launching their own blockchains and tokenized gold products, while banks tighten control over tokenized securities platforms and push for regulatory frameworks that protect their market share, all under the watchful eye of policymakers wary of systemic risks and the global reserve status of the US dollar.

The race for interoperability and multi-chain dominance is reshaping the competitive dynamics, as platforms like Solana, Base, and Canton attract institutional adoption through technical features, compliance, and partnerships with major asset managers and banks. The future is increasingly multi-chain, with each ecosystem—public, permissioned, or hybrid—solving distinct business problems and driving real economic activity, from tokenized money market funds to prediction markets and AI-driven payments. As Steve McLaughlin predicts, within two decades, 80% of every asset class may be tokenized, and the winners will be those who can blend the best of TradFi and DeFi, offer seamless cross-chain experiences, and adapt to the relentless pace of regulatory and technological change.

The future of financial markets is being shaped by a global embrace of blockchain and tokenization, with both established and emerging economies racing to define the next era of finance. As highlighted by firsthand accounts from Mumbai and Saudi Arabia, the phenomenon is not limited to the U.S. or Europe—markets worldwide are actively leapfrogging legacy infrastructure in pursuit of on-chain, globally transferable assets. This transformation marks one of the most significant upgrades to the global financial system, promising unprecedented accessibility and interoperability.

Regulatory clarity remains both a challenge and a catalyst, as evidenced by the rapid evolution of frameworks in the U.S. and abroad. The passage of landmark legislation like the Genius Act and the SEC’s Project Crypto in 2025, followed by ongoing bipartisan negotiations around the Clarity Act in 2026, have shifted the conversation from defensive posturing to proactive integration of digital assets into traditional finance. However, the complexity of passing comprehensive legislation—compounded by election-year politics and unresolved tax policy—means that the road ahead is still fraught with negotiation and adaptation.

Institutional adoption is accelerating at an unprecedented pace, moving from cautious exploration to urgent, boardroom-level strategies. Major players like UBS, NYSE, and ICE are not only investing in blockchain infrastructure but also launching fully on-chain trading platforms and tokenized asset products, with projections that all U.S. equities could be on-chain by 2035. This institutionalization is further underscored by the success of Solana and XRP ETFs, the proliferation of digital asset treasuries, and the strategic reserve narrative reshaping portfolio management, signaling that crypto is no longer a fringe asset but a core component of the financial mainstream.

Yet, the path forward is not without hurdles: systemic risks in DeFi, knowledge gaps within traditional institutions, and unresolved technical and insurance challenges around tokenized deposits all threaten to undermine stability if left unaddressed. The lessons of the 2017-18 ICO crash remain salient, reinforcing the need for robust due diligence and investor protection frameworks. Meanwhile, the convergence of AI and blockchain—exemplified by innovations like ClawdBot and the move toward agentic workflows in banking—offers both transformative potential and new vectors for security vulnerabilities, demanding a careful balance between innovation and risk management.