SEC Proposal to Repeal Stock Market Rules Could Reshape Crypto Regulation, Benchmark Says

A new analysis from U.S. investment bank Benchmark suggests that a proposal by the Securities and Exchange Commission (SEC) to repeal existing regulations governing stock market structure could have significant implications for the cryptocurrency industry. The proposal, which includes the removal of best execution obligations, may resolve longstanding legal and regulatory conflicts between decentralized finance (DeFi) automated market maker (AMM) mechanisms and the trading of tokenized stocks.

Background and Regulatory Context

The SEC’s proposal targets current rules that require brokers to seek the best possible execution for client orders, a standard that has been difficult to apply to DeFi platforms that operate without traditional order books. Automated market makers, which rely on liquidity pools and algorithmic pricing, do not fit neatly into the existing regulatory framework designed for centralized exchanges. Benchmark analysts argue that repealing these rules could create a more coherent regulatory environment for tokenized securities, which are digital representations of traditional stocks issued on blockchain networks.

Key Beneficiaries Identified

According to a report from The Block, Benchmark identified Securitize as the most direct beneficiary of the proposed changes. Securitize provides the infrastructure for BlackRock’s tokenized money market fund, BUIDL, and is positioned to expand its services if regulatory barriers are reduced. Coinbase (COIN) and Galaxy Digital (GLXY) were also named as potential beneficiaries, given their existing operations in digital asset trading and tokenization.

Remaining Challenges

Despite the potential benefits, Benchmark noted that the proposal does not address other critical regulatory issues. Alternative trading system (ATS) registration requirements, as well as frameworks for custody, clearing, and settlement of digital assets, remain unresolved. These factors continue to pose significant challenges for the broader adoption of tokenized securities and DeFi platforms.

Timeline and Next Steps

The SEC is expected to collect public comments on the proposal for 60 days before scheduling a vote, which could take place early next year. The outcome of the comment period and subsequent vote will determine whether the rule changes move forward. Industry participants and legal experts are closely monitoring the process, as the decision could set a precedent for how digital assets are regulated within the U.S. financial system.

Conclusion

Benchmark’s analysis highlights a potential turning point in the intersection of traditional securities regulation and cryptocurrency markets. While the SEC’s proposal could resolve specific conflicts related to best execution and AMM mechanisms, it does not eliminate all regulatory hurdles. The coming months will be critical as the SEC gathers feedback and moves toward a final decision, with implications for firms like Securitize, Coinbase, and Galaxy Digital, as well as the broader DeFi ecosystem.

FAQs

Q1: What is the SEC proposing to change?
The SEC is proposing to repeal certain stock market regulations, including best execution obligations, which could affect how tokenized stocks and DeFi platforms operate.

Q2: How could this benefit the cryptocurrency industry?
Removing best execution rules could resolve legal conflicts between DeFi automated market makers and traditional securities regulations, potentially allowing tokenized stocks to trade more freely.

Q3: Which companies are most likely to benefit?
Benchmark identified Securitize, Coinbase, and Galaxy Digital as potential beneficiaries, with Securitize being the most directly impacted due to its role in BlackRock’s tokenized money market fund.