Regulatory Roundup #12

Summary

Last week’s theme was institutional reality setting in. Tokenization stopped being a conference buzzword and started looking like actual market infrastructure, with exchanges, clearing houses and regulators all lining up behind on-chain settlement, 24/7 markets and programmable assets. Elsewhere, the US managed its usual split-screen act of regulatory encouragement and litigation, leaving CLARITY stranded and prediction markets caught between federal blessing and state-level suspicion. Europe kept grinding through MiCA implementation and crypto tax reporting, the UK reminded banks that “computer says no” is not a policy, and South Korea delivered a timely reminder that even the most advanced tech cannot save you from a classic pump-and-dump. The direction of travel is clear. The ride remains unpredictable at best.

🔦 Spotlight

🏛️ 2026: The year of tokenization

For years, tokenization has been the patient dinner party guest of financial innovation: politely mentioned, vaguely understood, and never the life and soul of the party. That is changing. In the space of a few months, the NYSE, Nasdaq, the UK FCA, South Korea's National Assembly, and the organization that settles pretty much every US securities transaction have all independently concluded that putting stocks, bonds, and funds on blockchain is no longer just a nice concept. It is infrastructure.

Kicking off 2026 was some big news from the Big Board. On 19 January, the New York Stock Exchange announced the construction of a platform for 24/7 trading and on-chain settlement of tokenized US equities and ETFs, pending regulatory approval. The venue will marry NYSE's existing Pillar matching engine with blockchain post-trade systems, supporting instant settlement, dollar-denominated orders, stablecoin-based funding, and fractional shares. Tokenized shareholders will retain traditional dividends and governance rights; the tokens will be fungible with their conventional counterparts; and ICE (not that one) is already working with BNY and Citi to enable tokenized deposits across its clearinghouses. If you were wondering when "TradFi meets DeFi" would stop being a conference talking point and start becoming plumbing, here is your answer.

Nasdaq, not to be outdone, filed its own tokenization proposal with the SEC back in September 2025. Its model is subtly different: rather than launching a separate venue, Nasdaq wants to let investors choose whether to settle trades in traditional or tokenized form on a trade-by-trade basis, with the tokens handled through the DTC. The SEC is still chewing this over, with a comment period that only just closed, but the principle is the same: tokenization as an option within established market structure, not as a parallel universe.

What makes both initiatives credible is the other piece of the puzzle that landed in December. The SEC's Division of Trading and Markets granted the DTC a no-action letter allowing it to pilot a securities tokenization service on approved blockchains. Under the scheme, DTC participants can elect to have their security entitlements recorded using distributed ledger technology rather than only on the central ledger. Tokens representing those entitlements can then transfer directly between participants' registered wallets without needing DTC to intermediate every move. Crucially, the underlying ownership remains registered to Cede & Co. (the DTC's nominee), and all existing investor protections apply. It is tokenization with training wheels, but training wheels attached to an organization that clears over $3 quadrillion a year.

The DTC followed up almost immediately by partnering with Digital Asset Holdings to tokenize a subset of US Treasury securities on the Canton Network, with a minimum viable product targeted for the first half of 2026. DTCC will co-chair the Canton Foundation alongside Euroclear, positioning itself to shape the standards that define how this all works. In other words, the adults in the room have decided they would rather set the pace than work their way through the pack.

Meanwhile, over this (less icy, but wetter) side of the Atlantic, the UK Financial Conduct Authority published CP25/28, its consultation on progressing fund tokenization. The paper takes the Investment Association’s "Blueprint" model for tokenized fund registers and starts filling in the regulatory detail: how fund managers can mint and burn tokens representing units, use public or private blockchains (with appropriate controls), and potentially settle fund transactions in digital cash instruments. An optional "direct to fund" dealing model would allow investors to deal directly with the fund or depositary, cutting the fund manager out of the box-and-match arrangement that currently adds operational overhead. The FCA already authorized the first tokenized UK UCITS under this model in 2025, and final rules are expected in the first half of 2026. The consultation also floats future scenarios where tokenized portfolio management could work at retail scale, with DLT enabling what amounts to mass customization of investment products. It is about as ambitious as FCA consultations get.

We highlighted last time that a lot is going on in South Korea. In mid-January 2026, the National Assembly passed amendments to the Capital Markets Act and the Electronic Securities Act that formally recognize security tokens as legitimate financial instruments. The new framework lets qualified issuers create tokenized securities using blockchain, and allows those products to trade through licensed brokerages. Tokenized real estate, bonds, and investment funds are expected to hit the market throughout 2026, with full-scale operation provisionally set for January 2027. Major securities firms are already repositioning: Hanwha Investment and Securities, for one, has signaled an intent to become a "digital asset-specializing" firm, with real-world asset tokenization at the core of its strategy. Regulators will spend the next year building out disclosure requirements, investor protections, and a blockchain-based account management system, but the legal foundation is now in place.

What unites these moves is not blockchain maximalism but something more prosaic: the realization that tokenization solves real problems that traditional market infrastructure was not designed for. Instant settlement reduces counterparty risk. 24/7 availability increasingly matches the rhythm of a global investor base. Fractional shares lower barriers to entry. Programmable dividends and corporate actions eliminate manual work, middlemen and reconciliation headaches. Public or permissioned ledgers create audit trails that make life easier for compliance officers (life’s real heroes), not harder. BlackRock's BUIDL fund, which surpassed $4 billion in assets under management by November 2025, is the proof of concept: a tokenized money market fund that pays daily dividends on-chain, runs across multiple blockchains, and is now accepted as collateral on major trading platforms. It is not speculative. It is boring, yield-bearing, and exactly what institutions want.

None of this means tokenization will be seamless. There are hard questions about market practice and surveillance when trading never stops, about how circuit breakers work at 3am on a Sunday, about which blockchains get approved and who decides, and about what happens when a smart contract goes wrong and there is no human at the other end of the phone. Regulators are approaching this cautiously, with pilots and no-action letters and conditional approvals, precisely because the stakes are high.

The direction of travel is becoming unmistakable. Tokenization is not arriving via the crypto exchanges that first championed it. It is arriving through the NYSE, Nasdaq, DTCC, and the world's largest asset managers, all of whom have decided that the blockchain is not a threat to be contained but a tool to be used. 2026 - looking increasingly like the year that tokenization becomes the life and soul of the party.

🌎 Global Developments

🇺🇸 United States

🏛️ CLARITY Act remains stuck but Polymarket punters smell progress

The Senate Banking Committee postponed its markup of the CLARITY Act on 14 January 2026, leaving the market structure bill exactly where it has been for months: almost ready, but not quite. 

We’ve covered the lack of clarity/CLARITY to death in these roundups, but to recap the latest: the core dispute centers on stablecoin yields. Banking industry representatives pushed an amendment to prevent exchanges and other platforms from paying interest-like rewards to customers holding stablecoins, even where the platform is not the issuer. Coinbase views this as regulatory protection for traditional deposits; banks see it as closing a loophole. Neither side is backing down, but Polymarket odds on passage by end-2026 have crept up to 65% at the time of writing. Honestly, at this point we’re just waiting for something to happen.

Speaking of prediction markets…

🎰 Prediction markets: federal embrace meets state-level hostility

The CFTC and state gaming regulators spent this week demonstrating that American federalism remains as messy as ever. On the one hand, CFTC Chairman Mike Selig formally withdrew the Biden-era proposal that would have banned political and sports prediction markets, calling it "the prior administration's frolic into merit regulation." On the other hand, Nevada's Gaming Control Board sued Coinbase for allegedly operating unlicensed sports betting, because nothing says regulatory clarity like simultaneous green lights and lawsuits.

Selig's move clears the decks for a new rulemaking that's expected to be friendlier to platforms like Kalshi and Polymarket, which together processed $37 billion in trading volume last year. The withdrawn proposal had sought to treat political event contracts the same as contracts on war, terrorism, and assassination. Selig characterized this as government overreach and promised a framework "grounded in a rational interpretation of the law."

The timing is convenient for the expanding prediction market industry. Coinbase launched its prediction markets through a partnership with Kalshi in late January, Gemini secured a designated contract market license for its Titan platform, and Polymarket returned to the U.S. market in December after receiving CFTC no-action relief. Sports contracts now account for 90% of Kalshi's notional volume, making the federal-state jurisdictional fight rather more than academic.

Nevada disagrees with the federal consensus. The Gaming Control Board filed suit against Coinbase on February 2, arguing that sports-linked event contracts constitute wagering under state law and require a gaming license. The regulator requested a temporary restraining order and preliminary injunction, citing concerns about unlicensed betting, age verification (Nevada requires gamblers to be 21; Coinbase allows 18-year-olds), and the absence of state-mandated integrity protections.

"The Board takes seriously its obligation to operate a thriving gaming industry and to protect Nevada citizens," Chairman Mike Dreitzer said, in a statement that manages to sound both reasonable and territorial.

Coinbase is fighting back, accusing Nevada of a "state power grab" that Congress explicitly prohibited when granting the CFTC exclusive jurisdiction over event contracts. The exchange has already filed lawsuits against gaming regulators in Michigan, Illinois, and Connecticut over similar enforcement efforts. A Nevada court granted a temporary restraining order against Polymarket last week, forcing the platform to withdraw from the state for at least two weeks.

The practical upshot: platforms marketing "available in all 50 states" may need to add some asterisks. If states can successfully enforce gambling laws against federally regulated prediction markets, the national framework becomes considerably more fragmented. For now, the CFTC is planting its flag; the states are planting theirs; and the lawyers are billing accordingly.

💰 CME Group eyes its own coin (because of course)

CME Group, the world's largest derivatives exchange, revealed on its earnings call that it's exploring launching its own cryptocurrency, because apparently even the institutions that invented modern futures trading have decided they want a token too.

CEO Terry Duffy confirmed the firm is reviewing "initiatives with our own coin that we could potentially put on a decentralized network," alongside a "tokenized cash" product being developed with Google Cloud that's expected to launch later this year. The tokenized cash offering will involve a depository bank facilitating transactions, positioning it as a regulated settlement and collateral tool rather than a speculative asset.

The comments came in response to a question about tokenized collateral, specifically whether CME would accept stablecoins, tokenized deposits, or tokenized money market funds as margin. Duffy was characteristically cautious: "If you were to give me a token from a systemically important financial institution, I would probably be more comfortable than maybe a third or fourth-tier bank trying to issue a token for margin."

The initiative sits alongside CME's broader crypto expansion. The exchange is preparing to introduce 24/7 trading for all crypto futures in the second quarter, adding futures contracts for Cardano, Chainlink, and Stellar to its existing Bitcoin, Ether, Solana, and XRP offerings. CME's average daily crypto trading volume hit $12 billion last year, with Q4 volume up 92% to over $13 billion.

A CME-issued token running on a decentralized network would be a notable departure from other participants, like JPMorgan, which uses a private network for its tokenized deposit token. Whether the exchange actually launches such a product remains uncertain, Duffy stressed the project is exploratory, but the mere mention signals how far tokenization has traveled from the fringes to the center of market infrastructure conversations.

🇬🇧 United Kingdom

📋 FCA opens the gateway: applications from September 2026

The FCA confirmed on 8 January 2026 that it will open the "cryptoasset gateway" for applications in September 2026, well ahead of the new regime's expected commencement on 25 October 2027. Firms that submit applications during the gateway window will have their applications assessed by the FCA ahead of commencement, and crucially, even if the FCA has not determined the application by October 2027, these firms would generally be permitted to continue carrying on cryptoasset activities pending the FCA's decision.

The FCA has also launched CP26/4, setting out proposals in a wide range of areas, including proposed criteria for when stablecoin issuers and cryptoasset custodians should be classified as SM&CR "Enhanced" firms. The proposed thresholds are eye-catching: stablecoin issuers would be classified as Enhanced if the total value of backing assets exceeds £65 billion (calculated as a three-year rolling average), while cryptoasset custodians face similar treatment above certain AUM thresholds. The consultation closes on 27 January 2026.

🏦 HM Treasury tells UK banks to play nice

The UK Treasury has told banks it expects them to avoid unfairly restricting crypto services, following a report from the UK Cryptoasset Business Council alleging that major banks continue to block customers from accessing FCA-registered crypto exchanges. The report, based on a survey of 10 major exchanges operating legally in the UK, found that seven said the banking environment had become more hostile in 2025.

HM Treasury stated that crypto firms overseen by the FCA should not face account or transaction restrictions solely because they operate in the sector. This has been a hot topic as the UK continues to move towards a full crypto regime, with the industry seemingly successful in pushing back against initial FCA plans to restrict the purchase of cryptoassets via credit cards.

🇪🇺 European Union

📚 ESMA publishes knowledge and competence guidelines

ESMA published final guidelines for assessing knowledge and competence under MiCA on 28 January 2026. The guidelines specify criteria for assessing the knowledge and competence of staff providing advice or information about crypto-assets, and will apply from 28 July 2026.

For CASPs, this means training programs, competency frameworks, and documentation that demonstrates staff are actually qualified to talk about what they're selling. Novel concept, perhaps, but there we are.

📊 DAC8 goes live: tax reporting begins

DAC8 rules entered into force on 1 January 2026, expanding tax transparency to crypto-asset transactions across the EU. Reporting Crypto-Asset Service Providers (RCASPs) must now collect data on reportable crypto-asset transactions of EU-resident users, with reporting due within nine months after the end of the first fiscal year covered by the directive. The first exchanges of information with tax authorities will take place between January and September 2027.

The message is clear: the taxman cometh, and he's interested in your on-chain activity.

🇪🇺 MiCA Authorizations Update (per ESMA CASP Register)

• 🇲🇹 Damex Digital Ltd - 29 January 2026
• 🇩🇪 ISF Institut Deutsch-Schweizer Finanzdienstleistungen GmbH - 28 January 2026
• 🇮🇪 Interactive Brokers Ireland Limited - 22 January 2026
• 🇸🇰 Okazio s.r.o. - 15 January 2026

🌏 Asia-Pacific

🇦🇺 Australia

🔍 ASIC flags crypto regulatory gaps as key 2026 risk

Australia's securities regulator framed digital assets as a "regulatory perimeter" issue in its Key Issues Outlook 2026 paper, grouping crypto alongside payments and AI-driven financial services as technology-enabled activities that challenge existing regulatory frameworks.

ASIC's concern is structural rather than token-specific. The regulator warned that some companies may actively seek to remain outside regulation by exploiting unclear boundaries. "Some entities will actively seek to remain outside regulation, contributing to perceived regulatory uncertainty," ASIC wrote. "Ensuring clarity on licensing requirements and maintaining effective perimeter oversight will remain priorities for ASIC in 2026."

Meanwhile, the Corporations Amendment (Digital Asset Framework) Bill 2025 continues to work its way through Parliament. Financial Services Minister Daniel Mulino summed up the problem: "it's currently possible for a company to hold an unlimited amount of client crypto without any financial law safeguards." Under the bill, breaches could attract penalties of up to 10 percent of annual turnover.

ASIC has adopted a temporary no-action stance through mid-2026, giving companies breathing room to assess whether they need licenses. The message is simultaneously accommodating and ominous: sort yourselves out, because we're watching.

🇰🇷 South Korea

🔍 Regulators probe ZKsync price spike on Upbit

South Korea's Financial Supervisory Service has opened a preliminary investigation into a rather spectacular price anomaly on Upbit, the country's largest crypto exchange. ZKsync surged approximately 970% during a scheduled system maintenance window on Sunday, rising from around $0.023 to $0.24 before crashing back to its starting point once trading resumed.

The pattern has all the hallmarks of coordinated manipulation. According to local media reports, traders formed a "buy wall" ahead of the maintenance period as part of an apparent effort to artificially spike demand and force the price up while normal trading activity was suspended. Legal experts told South Korean newspaper Hanguk Kyungjae that the maneuver bears the classic signatures of a pump-and-dump scheme.

"We are aware that ZKsync experienced a rapid price fluctuation in a short period of time," a spokesperson for the FSS's Virtual Asset Investigation Bureau said. "We are looking into the matter and may quickly transition to a formal investigation after determining the severity of the case."

The timing is notable. South Korea recently passed legislation to formally enable token securities and is preparing to lift restrictions on corporate crypto investing. At the same time, regulators have been deploying AI tools to detect suspicious trading patterns and have taken action against Upbit for KYC violations. The ZKsync incident suggests that even as the regulatory framework matures, the old tricks remain depressingly effective.

🔎 Things to Watch

• 🏛️ Whether the CLARITY Act can be revived before midterm election politics make legislation impossible.
• 🇺🇸 Project Crypto implementation and the expected SEC-CFTC MOU.
• 🇬🇧 FCA consultation responses due 12 February 2026 for CP25/40, CP25/41, and CP25/42.
• 🇦🇺 Second reading of Australia's Corporations Amendment (Digital Assets Framework) Bill 2025.

Coming into view:

• 🇪🇺 MiCA transitional periods ending across remaining EU member states by July 2026.
• 🇬🇧 FCA cryptoasset application gateway opens September 2026.

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