SEC opens crypto floodgates as Wall Street eyes $1.6 trillion shift

The Securities and Exchange Commission has signaled a policy shift that would allow banks and asset managers to integrate crypto assets into mainstream trading and collateral operations, a move that could unlock as much as $1.6 trillion in tokenized collateral markets, according to people familiar with the matter.

"The SEC is recognizing that digital assets are not a separate asset class to be walled off — they are becoming infrastructure," said Diana Chen, regulatory policy analyst at Edgen. "This is the most consequential shift in crypto policy since the approval of spot Bitcoin ETFs."

The policy change comes as Wall Street firms have already moved $15 billion onto blockchain rails through tokenized Treasury and money market fund products, according to RWA.xyz. Hashnote's USYC leads with roughly $3 billion in assets, followed by BlackRock's BUIDL at nearly $2.9 billion and Franklin Templeton's BENJI above $1 billion. A report from Global Digital Finance and the International Swaps and Derivatives Association found that 66% of surveyed institutions plan to launch tokenized money market funds by 2027, while 44% expect to accept them as eligible collateral.

The stakes extend beyond investment returns. Financial institutions posted or received approximately $1.6 trillion in non-cleared initial and variation margin at the end of 2025, according to the GDF-ISDA report. Moving that collateral on-chain could reduce settlement delays and manual reconciliation costs that create liquidity pressure during market stress. Only 33% of surveyed firms believe existing money market fund processes are efficient, the report found.

The Tokenized Collateral Opportunity

Tokenized money market funds combine the stability and yield of traditional money market funds with the speed and 24/7 settlement of blockchain infrastructure. J.P. Morgan Asset Management launched its OnChain Liquidity-Token Money Market Fund last month, joining a field that already includes BlackRock, Franklin Templeton and Ondo Finance.

The GDF-ISDA working group conducted practical simulations with major financial institutions to test how tokenized funds would function across repo transactions, margin calls, collateral substitution and default scenarios. The exercises showed that tokenized funds can integrate with existing institutional processes without requiring a full infrastructure rebuild.

Regulatory Timeline and Industry Reaction

The SEC's shift aligns with parallel efforts in Congress. Commodity Futures Trading Commission Chairman Michael Selig said the Clarity Act — which would divide oversight of digital assets between the CFTC and SEC — remains within reach after the House passed the legislation last summer. "It's critical that we have a federal standard for crypto assets," Selig said, pointing to a patchwork of state laws that has hurt U.S. business.

Senator Cynthia Lummis, who leads the Senate Banking Committee's digital assets subcommittee, has said negotiators aim to release bill text and hold a vote this month. The committee advanced the measure in a 15-9 vote, with two Democrats joining Republicans. Lawmakers have warned that a failure to act before the August recess could delay the next opening for years.

This article is for informational purposes only and does not constitute investment advice.