Crypto for Advisors: Wall Street is done waiting on Congress for crypto rules

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In today’s newsletter, Eric Soufer of Tusk Strategies looks at what financial firms are building while Congress stalls on a crypto framework.

Then, in “Ask an Expert,” Diego Grassano explains what advisors should check before trusting a tokenized platform.

Without a federal framework, financial firms are standardizing compliance and infrastructure on their own.

When the Senate failed to advance the CLARITY Act on Sept. 15, the U.S. was once again left without a comprehensive federal framework for digital assets, and regulators moved to fill part of the gap. Two days later, the SEC issued an “innovation exemption” allowing certain venues to trade tokenized U.S.-listed stocks onchain.

But an exemption is not a statute, and it can be narrowed or withdrawn as easily as it was granted. That leaves financial firms with a practical question: What do you build while you wait? For advisors, the answer matters more than who won or lost in Washington.

That question ran through a Crain’s New York Business event last week, whether the topic was tokenization, compliance or cybersecurity. The people closest to the work aren’t waiting for Congress. They’re building for the world as it is.

Adam Schumann, vice president of legal at OKX, laid out the legal problem. U.S. firms answer to federal statutes, federal agencies, state laws and state regulators, and none of them move at the same speed. “You want general consistency, but you’re not going to reach uniformity,” he said. Firms work out the rest state by state and country by country, while agencies patch the most immediate gaps.

That patchwork has a cost. Aravind Raju, CFO of Uphold, said compliance is now one of the company’s largest departments because it builds tailored solutions for each state’s requirements. As rules become clearer and more aligned, he expects those resources can be redirected. For advisors, the takeaway is that compliance is a real cost of doing business on these platforms, and the firms that manage it well will have an edge.

You might expect that duplication to push the industry toward shared infrastructure. Instead, many institutions launched private, closed networks this year for tokenized assets, stablecoins and securities ledgers, and those networks can’t easily talk to one another. Lewis Tuff, CEO of Twilight, which builds clearing and settlement technology, said the result is that every firm ends up rebuilding the same connections.

Risk is moving in the opposite direction, toward separation. Early crypto firms bundled trading, custody and clearing under one roof. Today, traditional custodians hold digital assets, and the venues that execute trades are increasingly separate from the ones that safeguard them. That means no single entity has to hold every key function or become a single point of failure. Compliance and security are shifting too, from annual attestations and periodic reviews to checks that run continuously, with every transaction.

None of this required Congress, and that’s the point. Without a comprehensive framework, the industry is converging on practices any future law would find hard to ignore: verified counterparties, clear lines between trading and custody, and compliance that never stops running.