Wall Street firms build crypto compliance and trading infrastructure without U.S. law

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Highlights

U.S. Senate's failure to advance the CLARITY Act and the SEC's temporary tokenization exemption have left Wall Street firms operating under a patchwork of inconsistent digital asset regulations.
Institutions are building bespoke compliance systems to address overlapping state and federal requirements, creating significant operational costs and competitive advantages for firms managing these complexities efficiently.
Private tokenized asset networks, functional separation of trading and custody, and continuous transaction-level compliance controls are emerging as industry standards, likely influencing eventual U.S. regulatory frameworks.

Industry standards take shape amid policy delay

As reported by CoinDesk, the Senate's failure to advance the CLARITY Act on Sept. 15 leaves the U.S. without a broad federal structure for digital assets, even as regulators continue to address parts of the market. Two days later, the SEC issued an innovation exemption that allows certain venues to trade tokenized U.S.-listed stocks onchain, but the measure does not provide the permanence of legislation and can be revised or withdrawn.

That uncertainty is pushing firms to build around the current patchwork rather than wait for Congress. At a Crain’s New York Business event last week, speakers across tokenization, compliance and cybersecurity said institutions are designing systems for existing legal and regulatory conditions.

Adam Schumann, vice president of legal at OKX, said U.S. firms must respond to federal statutes, federal agencies, state laws and state regulators that do not move at the same pace. He said companies can seek consistency, but not full uniformity, forcing them to adapt market by market while agencies address the most immediate gaps.

Aravind Raju, CFO of Uphold, said compliance has become one of the company's largest departments because it builds tailored solutions for different state requirements. He said clearer and more aligned rules could eventually free up those resources, but for now compliance remains a significant operating cost and a potential competitive advantage for firms that manage it efficiently.

Operational split and continuous controls reshape the market

Despite the burden of duplicated compliance work, many institutions are not converging on shared systems. Instead, private and closed networks for tokenized assets, stablecoins and securities ledgers have launched this year, creating separate infrastructures that are not easily interoperable.

Lewis Tuff, CEO of Twilight, which develops clearing and settlement technology, said the effect is that firms repeatedly rebuild the same connections. That fragmentation contrasts with another market trend, the separation of key functions such as trading, custody and clearing.

Where early crypto businesses often combined those roles, traditional custodians are now holding digital assets while execution venues increasingly operate separately from safeguarding providers. The model reduces the need for one institution to control every critical function and lowers single-point-of-failure risk.

Compliance and security practices are also becoming more continuous. Instead of relying mainly on annual attestations or periodic reviews, firms are moving toward transaction-level checks that operate on an ongoing basis, a shift that could influence whatever formal U.S. framework eventually emerges.

The industry is therefore settling around practices that future legislation may find difficult to ignore, including verified counterparties, clearer boundaries between trading and custody, and compliance systems that run constantly. Raju said that within three years the term "crypto" may fade from common use as tokenized Treasuries and money funds become routine, suggesting the infrastructure now being built could outlast the current policy cycle.

Our earlier article on the surge in cybersecurity and privacy startup funding described how investor appetite stayed strong as total Q3 funding rose on the back of fewer but larger late-stage rounds. We also noted that AI-driven and identity security firms attracted much of that capital, alongside a pickup in consolidation through major acquisitions—underscoring why security and compliance capabilities are becoming increasingly strategic for institutions.

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