TL;DR
- Wall Street warns the SEC that crypto exemptions could destabilize markets and hurt investor protection.
- They argue regulation should be based on economic activity, not the technology or labels used.
- Yield-bearing stablecoins are a major flashpoint, seen as a threat to traditional banking deposits.
Wall Street giants met with the U.S. SEC’s crypto task force on Tuesday to debate the financial watchdog’s aggressive push toward a pro-crypto agenda.
Financial industry heavyweights raised concerns to the SEC that exemptions for tokenized securities and DeFi projects could trigger a market crash.
Representatives of JPMorgan, Citadel, and SIFMA met with U.S. SEC members yesterday. The Wall Street giants expressed concerns that the SEC’s push toward a pro-crypto U.S. economy could destabilize the economy and topple financial markets.
Meeting records indicate representatives argue the commission’s plans to develop a framework meant to codify an innovation exemption for crypto and tokenized securities could hurt the broader U.S. economy. Concerns also stemmed from the SEC’s stated plans to exclude some DeFi projects from compliance obligations with U.S. securities laws.
Large financial players also claimed in materials distributed at the meeting that regulatory treatment should not be based on technology used or “categorical labels.” Instead, it should center entirely on economic characteristics.
In the documents, SIFMA added that “the same core regulatory principles must apply equally to all securities—whether in tokenized, book-entry or paper form, and to all entities engaged in securities businesses or that execute securities transactions.“
Key Criticisms on Exemptions and Investor Protection
Wall Street giants, including major stock exchanges like Nasdaq, Cboe, and CME Group, have voiced strong concerns about the SEC’s pro-crypto initiatives under Chair Paul Atkins. Efforts include an “innovation exemption” for crypto firms and potential allowances for tokenized stocks on blockchain platforms, which critics argue could undermine investor protections and give crypto exchanges an unfair edge over traditional markets.
Traditional financial players warn that exempting blockchain-based stock trading from standard rules risks market disruption, money laundering vulnerabilities, and reduced safeguards for retail investors. A November 2025 letter from the World Federation of Exchanges highlighted “negative and acute consequences” for U.S. market structure if tokenized assets bypass full compliance.
The SEC aims to roll out the exemption by early 2026, enabling domestic on-chain products after delays from a government shutdown. The shift marks a pivot from prior enforcement-heavy policies, aligning with President Trump’s agenda to foster U.S. crypto innovation and prevent offshore migration.
While banks like Bank of America and Morgan Stanley now recommend 1-4% crypto allocations in portfolios, resistance persists on issues like stablecoin yields and regulatory jurisdiction shifts to the CFTC. Recent meetings between Wall Street and the SEC’s crypto task force underscore ongoing tensions as of January 2026.
Wall Street’s stance reflects concerns about market fragmentation. If crypto exchanges operate under lighter rules than traditional stock exchanges, trading volume could migrate to less-regulated platforms, potentially reducing market quality.
The World Federation of Exchanges warned in its letter that rushed changes could damage the U.S. position as a global financial center. International markets watch the U.S. approach to crypto regulation as a potential model.
JPMorgan and Citadel emphasized in the meeting that financial stability depends on consistent regulation. Creating carve-outs for blockchain-based products could introduce systemic risks absent from current market structure.
The SEC’s crypto task force received multiple written submissions outlining specific concerns about tokenized securities trading. Major exchanges detailed scenarios where regulatory gaps could enable market manipulation or fraudulent activities.
