Woofun AI reports that Bitwise CIO Matt Hougan argues the recent regulatory shifts by the SEC represent only a fraction of the necessary adjustments for Wall Street to fully integrate crypto assets, emphasizing that true adoption requires resolving fragmented infrastructure and specific regulatory barriers through countless incremental steps.

The institutional adoption bottleneck remains deeply structural, as large wealth-management platforms must still approve products individually before determining which account categories can hold them, followed by internal sign-offs. Only after these administrative hurdles are cleared do firms consider adding crypto to model portfolios, which drive the majority of advisor-directed money. This multi-layered approval process ensures that even with favorable regulatory headlines, the actual flow of capital into crypto rails remains constrained by legacy operational protocols.

A specific regulatory obstacle is Rule 611, the trade-through rule established under Regulation NMS in 2005, which mandates that exchanges and brokers prevent executions at prices worse than protected quotes displayed elsewhere. The SEC proposed rescinding this rule in June, with the comment period closing on Aug. 17. Hougan identifies this regulation as a critical barrier preventing decentralized protocols like Uniswap from integrating with traditional brokerage services to serve tokenized-stock investors, as the rule's structure was built specifically for interconnected traditional equity venues.

Woofun AI notes that Hougan argues if Uniswap can compete for tokenized stocks and tokenized bonds, it will perform exceptionally well, while Hyperliquid could similarly succeed if it enters regulated derivatives markets. Achieving this integration requires a series of regulatory wins, and the industry still has significant ground to cover. The potential for DeFi protocols to operate within regulated frameworks depends on removing such legacy constraints that currently isolate digital asset trading from traditional financial services.

Fragmentation and the lack of standardization pose further challenges, as different issuers build tokenized versions of the same underlying stocks using varying structures, rules, and chains. Hougan explains that a tokenized stock on entity A is not identical to one on entity B, meaning they cannot necessarily be arbitraged. This results in liquidity representing a single stock splitting across incompatible pools, preventing the consolidation and efficient trading that institutional investors require.

Structurally, Hougan draws parallels between the current U.S. financial market infrastructure and a series of parallel chains for individual asset classes, citing Trump's comments on Hyperliquid as part of this broader context. Separate rails for stocks, bonds, commodities, and derivatives are difficult to move between by design, creating siloed liquidity. Tokenization and Hyperliquid-style infrastructure could eventually collapse these disparate rails into financial super apps where multiple asset classes trade side by side, enhancing market efficiency.

Cross-margining represents a critical variable for capital efficiency, allowing collateral to be shared across stocks, bonds, derivatives, and crypto rather than holding separate pools for each product line. Hougan points to the FASB proposal regarding how certain digital assets could qualify as cash equivalents as another small step in this direction. Such updates shape balance sheets more than headlines, enabling institutions to optimize capital usage across diversified portfolios.

Institutional timing depends on whether the regulatory direction appears durable enough to justify building, acquiring, and integrating new systems, rather than waiting for every rule to be finalized. The threshold for action is crossed one unsexy rule at a time, moving beyond mere issuance rules to address interoperability, margin, and market-access rules. If issuance rules improve while other areas lag, the bear case suggests multiple tokenized versions of the same assets will remain stuck in separate pools that cannot be easily arbitraged.

The plumbing question, which determines whether Wall Street can effectively utilize crypto infrastructure, is answered rule by unsexy rule. This incremental approach underscores that viability depends on the harmonization of standards and the removal of legacy barriers, rather than dramatic legislative breakthroughs. True integration will emerge only when these foundational elements are aligned to support seamless cross-asset trading and liquidity consolidation.