Wall Street is bracing for a clash between emerging cryptocurrency firms and established financial giants, with the future of stock trading hanging in the balance. Crypto leaders like Coinbase, Robinhood, and Kraken aim to revolutionize the $62 trillion equity market by offering investors the ability to trade “tokenized” versions of stocks such as Apple, Tesla, and JPMorgan Chase. These tokenized assets could trade cheaply, 24/7, globally—beyond the traditional stock market hours. This push sets the stage for a major regulatory showdown: rewriting U.S. stock trading rules in a way that could elevate crypto companies into the top tier of financial services. Driving this transformation is President Donald Trump, who has openly embraced cryptocurrency since returning to the White House. He has placed industry allies in key regulatory roles, sparked optimism about crypto’s future in the U.S., and fueled a surge in token prices. Wall Street traditionalists, who once dismissed crypto’s threat, are now fighting back. They are lobbying the Securities and Exchange Commission (SEC) to require crypto firms to follow the same rules as established players, including registration and investor protections. Yet some traditional firms are hedging by adopting crypto themselves. “Many in traditional finance mistakenly believed that the crypto regulatory debate was really about crypto,” said Tyler Gellasch, a former SEC official and investor advocate. “It’s not.” If traditional finance ("TradFi") prevails, tokenized stocks would be regulated just like conventional stocks, trading no differently than today. But if crypto firms succeed, looser rules tailored to their models could emerge, potentially splintering the market. Critics warn this could lead to price volatility as two parallel markets develop. “Creating loopholes in traditional markets in the name of crypto is a helluva gamble to take with markets relied upon by millions of American retirees, college savers and businesses,” Gellasch added. The crypto industry’s push centers on tokenization—the process of placing assets like stocks on the blockchain. Enthusiasts believe blockchain technology will eventually replace decades-old financial infrastructures. Equity tokenization “opens up whole new opportunities for financing and trading,” said Don Wilson, founder and CEO of Chicago trading firm DRW, active in both crypto and traditional markets. “Ten years out, we’re not even going to talk about it as tokenized equities. We’re not going to use that phrase.” While tokenized stocks have been a long-term goal for crypto firms, Trump’s return to power accelerated their efforts. Coinbase and others are seeking SEC approval despite legal uncertainties, while firms like Robinhood and Kraken are focusing on overseas markets, acknowledging U.S. regulatory ambiguity. The SEC’s role is pivotal. Traditional finance heavyweights, including Citadel Securities owned by GOP megadonor Ken Griffin, warn against regulatory workarounds that could favor crypto firms. They argue tokenized shares are fundamentally no different from traditional ones and should be treated equally to avoid market fragmentation. “Policymakers definitely have to come in and make adjustments, but what we don’t want to see is suggesting that because something’s using one form of technology for the same product, it’s somehow treated differently than another form of technology,” said Kenneth Bentsen Jr., CEO of the Securities Industry and Financial Markets Association. Wilson of DRW agreed that tokenized equities “can absolutely and should absolutely trade under the existing rules.” A source close to Robinhood said that upending stock trading rules overnight “isn’t realistic,” but crypto firms need “some relief from the existing rules to make it work.” The source added, “Does tokenization have to disintermediate everybody right away? No. But some amount of disintermediation is probably inevitable in the long run.” SEC Chair Paul Atkins recently instructed staff to work with companies “to provide relief where appropriate to assure that Americans are not left behind,” hinting at a potential overhaul of stock trading regulations. “Whether an incumbent or a new entrant, the SEC welcomes all market participants who are hungry to innovate,” Atkins said. Crypto players are energized by the prospect of tokenized stocks disrupting TradFi. Diogo Mónica, general partner at crypto venture firm Haun Ventures, asserted that “power is going to be reduced on Wall Street.” Crypto scored a major win last month when Trump signed a bill creating a regulatory framework for stablecoins—tokens pegged to the U.S. dollar. “The banks got absolutely rolled on the stablecoin bill and are now facing enormous amounts of quickly moving, unfair competition,” said Corey Frayer, former SEC Chair Gary Gensler’s crypto adviser. “Wall Street is either going to learn that lesson and be very vocal to make sure that everybody has to play by the same rules, or they’re going to watch the SEC destroy the goose that laid their golden egg.” However, disrupting Wall Street is never simple. TradFi firms have adapted to new trends before, often by investing heavily and acquiring new technologies, which could ironically make them the next generation of crypto giants. BlackRock, for example, has already entered the tokenization space. Whether everyday investors want blockchain-based shares remains uncertain. Despite media attention, crypto remains niche: only 8 percent of Americans reported using crypto in 2024, down from 10 percent two years earlier, according to the Federal Reserve.

Filed under: Wall Street, Donald Trump, Stock Market, Finance & Tax, Cryptocurrency

Source: Originally published at Politico on August 8, 2025.

Frequently Asked Questions (FAQ)

Tokenization and Market Disruption

Q: What is tokenization in the context of stock trading? A: Tokenization is the process of representing traditional assets, like stocks, as digital tokens on a blockchain. This allows for features like 24/7 global trading and potentially lower transaction costs. Q: What is the main goal of crypto firms in the equity market? A: Crypto firms aim to revolutionize the equity market by offering tokenized versions of stocks that can be traded more cheaply, around the clock, and globally. Q: What are the potential outcomes if crypto firms succeed in their push for tokenized stocks? A: If crypto firms succeed, it could lead to looser regulations tailored to their models, potentially fragmenting the market and leading to price volatility due to parallel market development. Q: What is the concern regarding market fragmentation? A: Market fragmentation could occur if tokenized shares are regulated differently from traditional ones, creating two parallel markets that may struggle to interact efficiently. Q: How are traditional finance firms responding to the rise of tokenized stocks? A: Some traditional firms are fighting back by lobbying regulators to ensure crypto firms follow the same rules, while others are adopting crypto technologies themselves. Q: What is the role of the SEC in this regulatory showdown? A: The SEC plays a pivotal role in determining whether tokenized stocks will be regulated like conventional stocks or if new rules favoring crypto firms will emerge. Q: What is the potential impact of "creating loopholes in traditional markets in the name of crypto"? A: Critics warn that this could be a significant gamble with markets relied upon by millions of American retirees, college savers, and businesses, potentially leading to increased volatility.

Regulatory Environment and Political Influence

Q: How has President Trump's stance influenced the cryptocurrency industry? A: President Trump's embrace of cryptocurrency has led to the appointment of industry allies in key regulatory roles, fostering optimism and contributing to a surge in token prices. Q: What was the significance of the recent stablecoin bill signed by President Trump? A: The bill establishing a regulatory framework for stablecoins was seen as a major win for the crypto industry, potentially creating significant competition for traditional banks. Q: What is the argument from traditional finance players like Citadel Securities regarding tokenized shares? A: They argue that tokenized shares are fundamentally the same as traditional ones and should be regulated equally to avoid market fragmentation. Q: What kind of "relief" does the crypto industry seek from existing stock trading rules? A: The industry seeks some flexibility from current rules to make their tokenization models viable, while acknowledging that a complete overnight upheaval is unrealistic.

Blockchain Technology and Future of Finance

Q: What is tokenization? A: Tokenization is the process of converting assets, such as stocks, into digital tokens on a blockchain. Q: What is the long-term belief of crypto firms regarding blockchain technology? A: Enthusiasts believe blockchain technology will eventually replace existing, decades-old financial infrastructures. Q: How do proponents view equity tokenization? A: Proponents see equity tokenization as opening up new opportunities for financing and trading, with some believing the term "tokenized equities" will become obsolete as the technology becomes standard.

Market Adoption and Investor Sentiment

Q: What is the current adoption rate of cryptocurrency among Americans? A: Despite media attention, crypto remains niche, with only 8 percent of Americans reporting using it in 2024, a decrease from 10 percent two years prior.

Crypto Market AI's Take

The ongoing debate between traditional finance and emerging crypto firms highlights a significant shift in the financial landscape. The drive towards tokenizing real-world assets, particularly equities, on the blockchain promises greater accessibility, efficiency, and global reach. However, as the article points out, this innovation is not without its challenges, primarily revolving around regulation and market stability. At Crypto Market AI, we leverage advanced AI and machine learning to navigate these evolving markets. Our focus is on providing sophisticated tools for both institutional and retail investors, enabling them to capitalize on emerging opportunities while managing inherent risks. We believe that the integration of AI with blockchain technology is key to democratizing finance and creating more transparent and efficient markets. Our platform offers AI-powered trading bots and market intelligence to help users make informed decisions in this dynamic environment.

Trump’s crypto embrace opens the door to a Wall Street overhaul