Crypto Is Rebuilding TradFi, Not Replacing It

From the cypherpunk days to now, crypto has been framed as a replacement for traditional finance. However,  recent moves by the Federal Reserve, SEC, and CFTC point toward a different future: as argued in my previous article, blockchain technology is increasingly being integrated into the existing financial plumbing system rather than replacing it.

Fed Proposals for Stablecoin Issuance

On September 24, the Federal Reserve released two proposed rules (R-1899 and R-1900) implementing the GENIUS Act for stablecoins in the banking system. Unlike the GENIUS Act’s broader legal framework, these proposals specify how the Act will work for institutions under the Fed’s rule. R-1899 sets the operating requirements for Fed-supervised stablecoin issuers, while R-1900 establishes the approval process for banks to issue stablecoins through subsidiaries.

More specifically, R-1899 specifies how issuers must back and manage their stablecoins. Stablecoins must be fully backed by permitted, highly liquid reserves, while issuers meet Fed standards for liquidity and risk management. The proposal also limits issuers largely to stablecoin-related activities and restricts paying holders interest or yield - a topic that stalled the Clarity Act for months.

R-1899 also gets specific about how these rules would work. Issuers must maintain at least 1:1 reserves, with Treasury securities limited to maturities of 93 days or less and redemptions completed within two business days. Rather than simply requiring “adequate capital,” the proposal sets a formula whereby capital must equal 2% of the first $20 billion in stablecoins issued, 1.5% of the next $30 billion, and 1% above $50 billion, while uninsured deposits and undercollateralized reverse repos carry an additional 2% capital charge. Lastly, new issuers also face a $5 million minimum capital floor, annual Fed examinations, and weekly financial reporting.

As for R-1900, Fed-supervised state member banks must apply to issue stablecoins through a subsidiary and submit a business plan with three years of financial projections. The Fed has 30 days to determine whether an application is complete and 120 days to approve or deny it; otherwise, it is automatically approved.

Together, the proposals move stablecoins closer to becoming part of TradFi plumbing rather than an alternative to it. In other words, blockchain is strengthening the U.S. dollar rather than replacing it with speculative digital assets.

SEC Securities Clarification

On September 25, the SEC’s Division of Corporation Finance issued new guidance clarifying how securities laws apply to crypto assets. Rather than creating new rules, the FAQs clarify how the SEC’s March 2026 crypto framework applies to the development, marketing, and buybacks of crypto tokens. The guidance itself has no legal force; instead, it represents the views of the SEC staff. Nonetheless, these views are particularly important for how centralized exchanges and custodians list digital assets (I can confirm this as someone who worked in a listings department before).

The SEC established an important distinction: a crypto asset need not be a security merely because it was sold through an investment contract—an arrangement where buyers expect profits from the efforts of a project’s team. That contract can end as the network develops, leaving the underlying token outside securities law.

The new FAQs clarify what projects can do afterward. Once a network is functional, developers can continue to develop, upgrade, and promote it without entering into a new investment contract, so long as they are not promising profits based on their efforts.

The guidance goes further for decentralized networks. Once no central party controls a functional network, statements by the original issuer generally do not create a new investment contract, while exchanges providing secondary trading are not automatically considered promoters. This echoes former SEC Director William Hinman’s 2018 view that as a network decentralizes and reliance on its original team declines, its token becomes less likely to constitute an investment contract.

The SEC also clarifies that token buybacks do not make a functional network’s token a security. However, buybacks promising yield or returns before the network is functional could be part of an investment contract.

The broader shift is clear: regulators are making room for blockchain as technology, rather than treating every token as a speculative financial product.

The CFTC Moves Traditional Assets and Records Onchain

On September 24, the CFTC updated its crypto and blockchain FAQs to address two areas: (1) tokenized investments of customer funds and (2) blockchain-based recordkeeping. It’s important to note that the guidance does not create new rules; instead, it applies existing CFTC rules for traditional finance to tokenized assets and their blockchain records.

The first change concerns how futures commission merchants (FCMs) and derivatives clearing organizations (DCOs) can invest customer funds. Existing CFTC rules already limit how firms can invest customer funds, generally to safe and liquid assets such as U.S. Treasuries and government money-market funds. The new guidance clarifies that these investments can also qualify in tokenized form, provided they carry the same legal and economic rights.

The CFTC had already taken the same approach to collateral (under its Tokenized Collateral Guidance) , allowing approved assets such as U.S. Treasuries to be used in tokenized form for futures and swaps.

With the second area, CFTC-regulated firms can maintain required records on blockchain as long as they meet existing recordkeeping standards. In other words, the records move onchain, while the requirements remain the same.

The broader direction is straightforward: the CFTC is allowing traditional financial assets and records to move onto blockchain without creating a separate financial system for them. The assets and the rules remain the same—just the infrastructure underneath them changes. That fits directly with CFTC Chairman Michael Selig’s description of preparing U.S. markets for “mass tokenization.”

Crypto was built to replace the financial system. Instead, its lasting legacy may be rebuilding the infrastructure underneath it. Stablecoins are becoming banking infrastructure, traditional assets are moving onchain, and blockchain is increasingly serving TradFi rather than replacing it. In a way, blockchain is merely serving the same function as the telegraph did in the mid-1800s: increasing and securing settlement, rather than designing new financial sectors.