Is a Holistic Regulatory Framework the Key to Bridging TradFi and Crypto Markets?

The US Securities and Exchange Commission is moving away from piecemeal enforcement and toward a more structured, holistic approach to crypto regulation. Recent executive actions and SEC statements emphasize the need for clear, consistent rules that can accommodate both traditional financial institutions and emerging digital asset platforms.

Under Chairman Paul Atkins, the SEC has committed to developing a rational regulatory framework that updates existing rules to include on-chain cryptocurrencies, aiming to provide clear rules of the road for issuance, custody, and trading. This marks a significant departure from the prior regulation-by-enforcement era, which many industry leaders criticized for stifling innovation and creating uncertainty.

The SEC’s new Crypto Task Force has launched public roundtables and is actively soliciting input from industry, academics, and other regulators, signaling a more collaborative and transparent process.

Shared Jurisdiction and Federal Preemption Gain Momentum

A proposed crypto market infrastructure bill envisions a regulatory system based on shared jurisdiction between federal agencies, such as the SEC and the Commodity Futures Trading Commission, and state authorities. This approach would enable a unified national framework while allowing for state-level innovation and oversight.

Federal preemption is considered essential to prevent a patchwork of conflicting state laws, which could hamper the growth of both crypto and traditional finance. The bill also contemplates new pathways for digital asset trading platforms, modeled after alternative trading systems, to ensure liquidity and investor protection.

This evolving structure is designed to let technology and markets mature without undue regulatory barriers while still providing robust anti-fraud and anti-manipulation safeguards.

Did you know?
The SEC’s Crypto Task Force was launched in early 2025 with a mandate to develop a comprehensive regulatory framework for digital assets, marking the first time the agency has created a dedicated unit for this purpose.

AML, KYC, and Consumer Protection Remain Central

A holistic framework must address anti-money laundering and know-your-customer requirements, which remain core to US crypto regulation. Crypto companies are classified as financial institutions under the Bank Secrecy Act and are subject to oversight by the Financial Crimes Enforcement Network, as well as the SEC and Commodity Futures Trading Commission for certain activities.

These requirements aim to deter illicit finance and promote fair competition between crypto-native and traditional financial firms. Enhanced consumer protection measures, including expanded disclosure requirements and clear definitions for digital assets, are also being prioritized.

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Industry and Regulator Collaboration Accelerates Progress

Industry groups and regulators are increasingly working together to shape the future of digital asset oversight. The SEC’s Crypto Task Force, for example, is engaging with stakeholders through public comment periods and roundtables to ensure that new rules reflect real-world needs and technological realities.

Commissioner Hester Peirce’s recent proposal for a four-part framework to categorize crypto assets and clarify securities laws demonstrates a willingness to rethink legacy approaches and embrace innovation. This collaborative stance is considered vital for building trust and fostering responsible growth across both sectors.

The Road Ahead: Opportunities and Challenges

While momentum is building for a holistic regulatory framework, significant challenges remain. Questions persist about how to define digital assets, balance innovation with risk, and ensure effective enforcement without stifling market development.

Nonetheless, the SEC’s evolving approach and the push for shared jurisdiction signal a new era for US financial markets. If successful, a unified framework could bridge the gap between traditional finance and crypto, unlocking new opportunities for investors and industry alike.