The SEC's Blockchain Obsession
Yesterday's Technology Won't Save Tomorrow's Markets
On the Monday that the markets were reeling from the tariff announcements a few weeks ago, I sat with a group of SEC officials. Half of them looked like death warmed over - likely from spending their weekends frantically trying to understand what happened. What followed was an illuminating, if sometimes frustrating, discussion about technology regulation that I feel compelled to share.
The Time Machine Trap
Most federal regulators, including the SEC are stuck in a time machine. They are obsessing over how to regulate 15-year-old blockchain technology while the rest of the world races ahead. It's like watching someone meticulously craft regulations for the fax machine in 2025. Oh wait, some still do... This myopia would be barely a blip on the radar if it wasn't so dangerous for America's position in global financial markets.
The SEC's mandate is clear: protect the equities markets through transparency, safety, and stability. Yet their current approach to emerging technology risks undermining all three objectives.
Blockchain Is Just One Tool in a Growing Toolbox
During our meeting, I explained a fundamental reality: blockchain is not the only way to tokenize assets, and by 2030, it likely won't even be the preferred method. The current coupling of blockchain and tokenization is a technological marriage of convenience, not necessity.
Yet the regulatory dialogue remains fixated on "making blockchain legal" rather than creating frameworks that can adapt to whatever technology emerges next. This is akin to regulating horses instead of transportation.
The painful truth?
While the SEC debates the minutiae of blockchain regulation, researchers in co-working spaces, garages, and labs across America and around the world are developing new tokenization technologies that will render much of this discussion obsolete.
Regulatory Archaeology vs. Futureproofing
Our regulations are fundamentally broken because they focus on "how" rather than "what." We embed specific technologies into regulatory frameworks, ensuring their obsolescence before the ink is dry.
I've watched this movie before. When I served as the first Chief Innovation Officer at the FDIC, I observed firsthand how regulations mentioning specific technologies like fax machines and VPNs became anachronistic anchors, dragging innovation to the ocean floor. Just look at banking regulatory handbooks and see the number of now legacy technologies embedded in them.
The solution is embarrassingly simple: regulations should be technology-neutral and outcome-focused. Don't tell me I need a blockchain to achieve secure digital asset transfer - tell me what security, transparency, and stability outcomes you expect, and let the market determine the best technological approach. Picking technologies, especially in an era where the US government is not driving the creation of those technologies is dangerous.
The Quantum Elephant in the Room
While the SEC obsesses over yesterday's blockchain, a more existential threat looms: quantum computing.
ALL current blockchain technologies and most modern encryption systems are vulnerable to quantum computing attacks. This isn't speculative; it's mathematical certainty.
In 2017, I published a paper outlining these vulnerabilities. Years later, we still haven't adequately addressed them. Organizations must upgrade all encryption-dependent systems to quantum-resilient protocols immediately - not after quantum computers break the market.
AI: The Revolution That Wasn’t Televised
Meanwhile, non-deterministic generative AI is already transforming financial markets while barely appearing on the regulatory radar. Today's hedge funds use AI to manage billions in assets with teams of fewer than 10 people - work that once required hundreds.
This revolution demands regulatory frameworks that can adapt to probabilistic systems while still ensuring accountability. The SEC should be focusing on deterministic, explainable AI and methods for snapshotting data, algorithms, and decisions.
A Path Forward: From Follower to Leader
The SEC has an unprecedented opportunity to lead global markets by getting ahead of the next wave of technologies, rather than playing catch-up with the last one.
This requires:
Technology-neutral regulations that focus on outcomes rather than methods
Quantum resilience across all market infrastructure
Open-source tools and AI-driven monitoring for real-time risk management
Direct engagement with the tech community - not just Fortune 500 companies or a subset of hip technology vendors
Advocating for a fundamental right to privacy for personal identifiable information in the markets
The SEC must stop viewing innovation as a regulatory problem to solve and start seeing it as a strategic advantage to leverage. We need regulators who understand GitHub as well as they understand Goldman Sachs, and who understand that one can tokenize an asset without using a 10+ year old blockchain.
Time for Courage
The meeting ended with polite nods, thanks and promises to "take these considerations under advisement" - bureaucratic speak for "we'll get back to you in 2030."
But we don't have until 2030. The technological revolution in finance isn't coming - it's here. The countries and regulators who understand this will define the next century of global markets.
I left the meeting with a sobering thought: in their effort to protect investors from the risks of innovation, our regulators may be exposing them to an even greater risk - becoming irrelevant in markets transformed by technologies they failed to understand. This might seem surprising given the deregulatory pressures from the Trump administration but sadly this is just another version of “Oh, heck, it's the same dance, it's just a different tune.” (and bonus points for those who get the Star Trek reference).
The SEC faces a choice: continue regulatory archaeology, digging through the ruins of past technological revolutions, or help build the future. The safety and stability of our markets depend on them choosing wisely.
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This article was written by Sultan Meghji, CEO of Frontier Foundry. Visit his LinkedIn here.
This post was edited by Thomas Morin, Marketing Analyst at Frontier Foundry. View his LinkedIn here.