Welcome to the Friday edition of the Crypto In America newsletter!
What you’ll read: Market participants want clarity from the SEC on which blockchains qualify under its new tokenization exemption. Banking groups cry foul over the OCC’s stablecoin rewards rules, but crypto firms aren’t getting a free pass either. Plus, SharpLink CEO Joe Chalom joins the podcast, and a roundup of the week’s biggest headlines.
Comments are rolling in on the SEC’s new innovation exemption for tokenized securities venues, exposing a growing divide over which blockchains should qualify.
Released in September, the exemption allows qualifying firms to trade tokenized U.S. stocks without registering as traditional securities exchanges, subject to certain conditions. Among them, the smart contracts used by these venues must be auditable, public and deployed on a public, permissionless blockchain.
But the SEC’s definition of “public and permissionless” is drawing scrutiny, with some arguing it’s too broad and could allow more centralized networks to qualify, while others are seeking greater clarity or pushing to expand which blockchains are eligible.
As Crypto In America reported this week, three firms have already notified the SEC of their intent to operate TSVs, each pursuing a different approach. TSV LLC plans to use Canton Network, a privacy-focused blockchain whose foundation board includes one of the firm's founders, while OKXICE and Kephas Corp. plan to use Ethereum Layer 2 networks developed by their respective corporate groups.
In a letter submitted Thursday, the Solana Policy Institute urged the SEC to tighten its definition of “permissionless,” arguing regulators should look at who actually controls a blockchain, including who can validate or block transactions and change the network’s rules.
Hedera is pushing in the opposite direction. Its blockchain is public but permissioned, meaning only approved entities can validate transactions. In an October 9 letter, Hedera called on the SEC to expand the exemption to include networks like its own, arguing that restricted validator access shouldn’t disqualify them.
Others warn the SEC could be opening the door to regulatory arbitrage. Columbia Business School’s Omid Malekan, who has written about the benefits of decentralized blockchains, argues that centralized firms could exploit the exemption without giving up control over transactions or offering the transparency and censorship resistance associated with decentralized networks. Gabriel Shapiro, a securities lawyer at MetaLex Labs, raises similar concerns, warning that those controlling the underlying blockchain could have more power to influence or restrict trading than the venues operating on it.
The concerns extend beyond crypto firms. Wall Street trade group SIFMA has also asked the SEC to clarify what qualifies as a public, permissionless blockchain, while questioning whether companies should have to explicitly consent to having their shares tokenized, rather than being required to opt out. Better Markets, a Wall Street watchdog group, has gone further, calling on the SEC to withdraw the exemption altogether and pursue formal rulemaking.
An SEC official told Crypto In America that firms can begin operating 30 days after filing their notices, without waiting for SEC approval, provided they meet the exemption’s conditions. That means the agency doesn’t have to sign off on their chosen blockchains before they launch.
But that doesn’t mean the SEC is endorsing them.
“This isn’t a rulemaking,” the official said, explaining that the SEC deliberately kept its definition of “public and permissionless” broad to give firms room to experiment rather than prescribe exactly how blockchains must operate. Instead, the regulator is leaving it to the market to determine which blockchain models work.
The official said the agency is reviewing the feedback and could issue additional FAQs to address questions about the exemption. More substantive changes would require Commission action, while lessons from the temporary framework are expected to inform eventual formal rulemaking.
Separately, more companies are pushing back against having their shares tokenized. As of Friday, 22 of the 62 companies on OKXICE’s original list had objected, representing more than a third of the proposed issuers. OKXICE had previously disclosed 16 objections, with Reuters reporting six more on Friday, including Wells Fargo, Arm Holdings and Intuit.
Banks Cry Foul Over OCC's Stablecoin Rewards Rules
The OCC backed off proposed restrictions on stablecoin rewards in its final GENIUS Act rules this week, and the banking industry isn’t impressed.
The American Bankers Association slammed the OCC for dropping safeguards on stablecoin rewards, saying that crypto platforms could continue offering yield through third parties and lure deposits away from traditional banks.
“The result is a final rule that will preserve the status quo for crypto platforms despite Congress’s clear intent to protect local lending,” said ABA President and CEO Rob Nichols. “Attempting to address deposit flight and economic harm after it has occurred is the wrong approach.”
The Bank Policy Institute, which represents some of the country’s largest banks, also pushed back, warning that the OCC’s decision “replaces clarity with ambiguity” over which stablecoin rewards arrangements are allowed.
Community banks aren’t happy either. The Independent Community Bankers of America called for stronger safeguards, pointing to estimates that widespread stablecoin adoption could reduce community bank lending by as much as $850 billion.
But the impact on bank lending is far from settled. The nonpartisan Congressional Research Service notes that money flowing into stablecoins doesn't necessarily leave the banking system, since issuers can hold reserves in bank deposits.
The OCC also acknowledged the uncertainty in its final rule, saying the impact will depend on how quickly the stablecoin market grows and where issuers hold their reserves. The regulator said it plans to monitor the market and could revisit the rules if necessary.
Crypto firms, meanwhile, welcomed the decision. Coinbase Chief Policy Officer Faryar Shirzad praised the OCC for interpreting the GENIUS Act as Congress wrote it, while Circle’s Dante Disparte called the final rules an important milestone in establishing clear, durable standards for stablecoins.
But that doesn’t mean crypto firms have won the fight.
“We will continue to enforce the statutory prohibition, regardless of whether or not there’s any presumption,” an OCC official told reporters during a briefing this week.
In other words, the OCC may have dropped its proposed restrictions on certain arrangements between stablecoin issuers and third parties, but it can still investigate potential violations on a case-by-case basis.
An industry source familiar with the matter also noted that existing crypto rewards programs aren’t grandfathered in, meaning they’ll still have to comply with the law when its provisions take effect.
From BlackRock to SharpLink: Joseph Chalom’s Big Ethereum Bet
This week on the podcast, we sat down with Joseph Chalom, CEO of Ethereum treasury company SharpLink and former BlackRock digital assets executive.
From stablecoins and tokenized assets to 24/7 markets and AI agents managing our money, Chalom sees a fundamental shift in how the financial system operates, with Ethereum at the center of it.
We also get into how the SEC’s new innovation exemption could accelerate the move to onchain markets, what still needs to happen on the regulatory front, and the strategy behind SharpLink’s multibillion-dollar crypto treasury.
Catch the full episode on all platforms here.
News Flash
Here are the biggest stories that made headlines this week.
Bitcoin Slips Below $82,000 as Tech Stocks Sell Off. Crypto markets came under pressure alongside tech stocks, while rising oil prices added to inflation concerns. U.S. spot Bitcoin ETFs saw roughly $635 million in outflows Thursday, reversing some of the week’s earlier inflows.
a16z Crypto Drops the Crypto Name. Andreessen Horowitz is rebranding its crypto investment arm as a16z Frontier, expanding its focus beyond blockchain startups. Managing Partner Chris Dixon said crypto will remain a core part of its investment strategy.
SEC Flags Tokenization and AI in 2027 Exam Priorities. The SEC is putting tokenized securities, AI and private assets under the microscope, naming them as priorities for its 2027 examinations of Wall Street firms.
SoFi Brings Tokenized Deposits to Consumers. SoFi launched SOFIE, an FDIC-insured tokenized bank deposit offering 4.4% APY, bringing blockchain-based banking products to everyday customers.
Ireland Fines Coinbase Unit €3.25 Million. Ireland’s central bank penalized Coinbase Ireland over failures in safeguarding customer funds and overseeing outsourced services. Coinbase says customers suffered no financial losses.
Solana Activates Major Alpenglow Upgrade. The blockchain’s new consensus system went live this week, targeting transaction finality of roughly 150 milliseconds, down from about 12.8 seconds.
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