Free Markets and Innovation, Sort Of

What Clarity declines to do is impose customer identification duties on software that has no customers. Software that takes no custody and controls no transactions is in no position to identify anyone. Requiring KYC on code does not create a compliance obligation on intermediaries; it creates a prohibition on publishing code.

Tokenized securities

The last worry is that stocks will migrate to decentralized shadow markets with few investor protections. As clearly stated in section 10505, a security does not cease to be a security simply because it settles on a blockchain. Securities remain under SEC authority, and Section 10301 is the provision that reaches whoever exercises control over the venue where that trading happens.

But notice what the editorial does with tokenization across four paragraphs. When banks issue and settle tokenized stocks and bonds, it removes friction, lowers costs, and merits support. When the same instruments trade somewhere else, it is a shadow market inviting regulatory evasion. The technology did not change between those two passages. The identity of the firm using it did.

That pattern runs through the piece: nobody needs to explain to the Journal’s editorial page what it looks like when an established industry asks Washington to slow down a competitor. That is usually the argument it makes in the spirit of free and open markets, which is why this latest editorial is so disappointing. The editorial suggests Republicans are rushing this bill through before leaving town. It ignores that market structure legislation has been in the works for years. The House passed it a year ago with overwhelming bipartisan support. Senate Banking reported it in May. It has been on the Senate calendar since June and is not yet on the floor schedule this week. Haste is not the problem.