Regulatory clash over token securities intensifies… HSBC: "Policy tensions in the U.S. are rapidly escalating"

Regulatory debate in the U.S. over token securities has intensified, sharpening disagreements between traditional financial firms and the crypto industry. HSBC said in a recent research report that "policy tensions over the regulation of tokenized equity in the U.S. are rapidly escalating."

According to Cryptopolitan, HSBC analyzed in the report that regulatory approaches to tokenized real-world assets (RWA) and decentralized finance (DeFi) infrastructure have emerged as a key issue in internal SEC discussions. HSBC particularly assessed that the token securities market has moved out of the experimental phase and entered a point of friction between traditional finance and DeFi.

According to HSBC analysis, at a recent meeting of the U.S. Securities and Exchange Commission (SEC) Investor Advisory Committee, opinions were sharply divided on how to regulate the tokenized stock market. Citadel Securities argued in a 13-page letter submitted to the SEC that "many DeFi trading protocols meet the legal definition of an 'exchange'" and that existing exchange obligations should be applied equally. Citadel Securities warned that "overly broad exemptions could create regulatory arbitrage and lead to parallel markets with inadequate investor protection."

By contrast, Scott Boggess (Coinbase VP of Global Regulatory Policy) said that "decentralized trading models are structurally different from centralized exchanges and cannot be regulated by the same standards," emphasizing the need for a new regulatory framework that reflects DeFi features such as open-source-based systems and automated liquidity structures.

Paul Atkins, a commissioner of the U.S. Securities and Exchange Commission (SEC), identified token securities as "a key pillar of the U.S. capital markets modernization strategy." On the premise that expansion of the tokenization market is inevitable, he said a new framework centered on regulatory consistency and compliance systems must be established. SEC commissioner Caroline Crenshaw, however, raised concerns about whether core elements of traditional regulation — market integrity, custody structures, and investor protection — can function adequately in a token securities environment.

HSBC's report also mentioned expansion plans for its own Tokenized Deposit Service. It said the service is already operating in the U.K., Singapore, Hong Kong, and Luxembourg, and will expand to the U.S. and the United Arab Emirates (UAE) in the first half of 2026.

HSBC analysts Dara Maher and Nishu Singla, who authored the report, diagnosed that "the likelihood that the SEC will allow a token securities trading market subject to laxer standards than existing exchanges is low." The two analysts concluded that U.S. regulatory conditions are likely to require a market structure based on a fully permissioned (permissioned) blockchain. They explained this is because regulators prefer a structure that allows direct oversight of developers and market activity.

The SEC is expected to reach a conclusion on related matters within a few months. HSBC emphasized in the report that "while traditional finance, the DeFi camp, and U.S. regulators have different perspectives, they all agree on one forecast: the tokenization market will become much larger than it is today."