HSBC: Expects that the SEC will not allow on-chain stock markets accessible to US users to enjoy significantly lower regulatory intensity than traditional exchanges.

HSBC’s latest report states that the debate over the regulation of “tokenized US stocks” is accelerating, with traditional financial institutions and the crypto industry taking opposing positions on whether DeFi trading infrastructure should be regarded as traditional exchanges. The report notes that Citadel Securities submitted a 13-page document to the SEC, arguing that most DeFi protocols should be regulated as exchanges; otherwise, regulatory arbitrage and weaker “shadow markets” could result. On the other hand, the crypto industry, represented by Coinbase’s Vice President of Global Regulatory Policy Scott Bauguess, is calling for rules that better fit the decentralized model. HSBC says the SEC’s final stance remains unclear, but it is unlikely to allow on-chain stock markets for US users to be subject to significantly lower regulatory standards than traditional exchanges, and that regulatory sandboxes may become a viable option. (CoinDesk)