David Abramovitz is a lawyer and financial markets professional whose career spans securities regulation, enforcement, institutional equity markets and digital assets. He spent four years at the U.S. Securities and Exchange Commission, working in Market Regulation and Enforcement, before spending roughly 15 years in equity markets, first in institutional sales and later as a trader and portfolio manager. Over the past decade, his work has moved between law, business development and strategy, including work in traditional and decentralized markets. Abramovitz has also assisted lead counsel with evidentiary work related to the collapse of FTX.
In this interview with CryptoMegaphone, Abramovitz discusses the lessons traditional securities enforcement can offer digital-asset markets, the appropriate boundaries between enforcement, rulemaking and legislation, and the regulatory and operational challenges facing greater institutional participation. He also examines the evolving structure of digital-asset markets, the role of tokenization in financial infrastructure, and what a sustainable U.S. regulatory framework could look like.
Looking at digital-asset markets today, what lessons from traditional securities enforcement remain most relevant, and where do crypto markets present fundamentally different challenges for regulators?
The basic lessons of securities enforcement have held up remarkably well. Fraud is still fraud. Manipulation is still manipulation. And misleading investors is a problem whether the asset is a stock, a bond or a token.
The harder part in crypto is figuring out where responsibility sits. Traditional securities markets were built around identifiable intermediaries—exchanges, broker-dealers, custodians, clearinghouses, transfer agents and issuers. Crypto can combine some of those functions on a single platform, move them into software, or distribute them across a protocol where there may be no obvious intermediary at all.
So the enforcement question becomes broader than simply, “Was there misconduct?” You also have to ask: Who was in a position to prevent it? Who actually controlled the relevant activity? And where does the legal obligation attach?
That is one of the things my SEC experience taught me. Accountability matters, and in a conventional market you can usually trace responsibility through the institutional chain. In a decentralized or heavily automated system, that chain can be much harder to identify.
I don’t see crypto as requiring us to throw out traditional securities-law principles. The challenge is applying those principles to a market architecture that was not designed the way the old system was.
As the U.S. regulatory framework for digital assets becomes more defined, where do you believe the appropriate boundary should lie between enforcement, rulemaking and legislation?
The lines should be fairly straightforward. Enforcement should deal with violations of established law. Rulemaking should set prospective standards when an agency has the statutory authority to do that. And when the statute itself is inadequate—or when Congress needs to decide who has jurisdiction—Congress should make that call.
For years, one of the problems with U.S. crypto policy was that market participants often had to work backward from enforcement actions to figure out what the rules were supposed to be. That is not a good way to build the rules for an emerging industry.
I would not, however, make enforcement the villain. Regulators have an obligation to enforce the laws Congress has given them. The problem comes when an enforcement action effectively becomes the vehicle for deciding a fundamental question about statutory authority or market structure.
That is why I see the CLARITY Act as important. Whatever one thinks of its individual provisions, it recognizes that some of these questions are legislative questions—particularly the division of authority between the SEC and CFTC, the treatment of digital commodities and securities, and the rules governing digital-asset intermediaries.
We are watching that shift happen in real time. Senate Majority Leader John Thune filed cloture on the motion to proceed to the legislation before the August recess, setting up a procedural vote in September.
My SEC background makes me particularly sensitive to the distinction. Enforcement is a powerful tool, but it should not be asked to do Congress’s job.
What issues still need to be resolved before major financial institutions can participate in digital-asset markets at substantially greater scale?
Regulatory uncertainty is part of the problem, but I don’t think it is the biggest one anymore. The larger hurdle is whether the operational, custody and risk infrastructure is mature enough for a major institution to rely on it.
An institution has to be comfortable with the entire life of the asset: custody, valuation, settlement, capital treatment, accounting, auditability and compliance. Crypto still presents open questions at several of those points.
Custody is a good example. Legal ownership and technical control do not always line up neatly. Then there are the operational risks that are much less familiar to traditional finance—smart-contract failures, compromised keys, oracle problems and protocol-governance disputes.
So, for me, regulatory clarity is necessary, but it is not sufficient. A large financial institution does not simply ask, “Is this asset legal?” It asks whether it can build a reliable risk-management and operating framework around the asset.
The SEC’s custody discussions illustrate the point. Sophisticated firms such as Fidelity, Anchorage and BitGo are still working through how digital-asset custody fits with traditional broker-dealer and investment-adviser frameworks.
The CLARITY Act could help by providing a statutory basis for determining which assets and activities fall within SEC jurisdiction and which belong to the CFTC. That kind of certainty matters a great deal to institutions. But even if Congress passed the Act tomorrow, JPMorgan, Fidelity, BlackRock and others would still have to solve the practical infrastructure problems.
Regulators increasingly face questions involving trading venues, custody, clearing, settlement, market surveillance and conflicts of interest. Which parts of the emerging digital-asset market structure deserve the greatest regulatory attention, and why?
One thing worth remembering about traditional financial regulation is that the separation of functions was not accidental. Trading, custody, clearing, settlement and market making evolved as distinct activities in part because separating them can reduce conflicts and contain risk.
Crypto can change that. A digital-asset platform can potentially combine trading, custody, settlement and other functions in a way that would be difficult to replicate in traditional securities markets. That can create real efficiencies. It can also concentrate risk.
The question I would ask is: if one entity controls several stages of the transaction, what protections do we put in place to replace the safeguards that separation of functions used to provide?
The CLARITY Act is relevant here because it tries to establish clearer lines between SEC and CFTC jurisdiction and to set rules for intermediaries and other market participants. But legislation does not settle the deeper structural issue.
The technology itself may let us rethink clearing and settlement. If a transaction can settle almost immediately and ownership can be recorded directly on-chain, perhaps some of the traditional layers of intermediation are no longer necessary.
But if you remove an intermediary, you have to ask what job that intermediary was doing. Was it managing credit risk? Maintaining records? Providing liquidity? Protecting assets? Whatever the answer, that function has to go somewhere.
That, to me, is the interesting regulatory question: not simply whether an old intermediary can disappear, but what happens to the function it used to perform.
As stablecoins, tokenized deposits, tokenized securities and potentially CBDCs develop alongside one another, how do you expect the architecture of regulated financial infrastructure to change over the next several years?
I don’t see this as a winner-take-all contest. These instruments serve different purposes.
A stablecoin is generally a privately issued digital representation of fiat value. A tokenized deposit remains a liability of a commercial bank. A CBDC is a direct liability of the central bank. And a tokenized security is an existing financial asset represented and transferred through different technology.
The more interesting question is how those pieces fit together. The BIS has been influential in thinking about the future in terms of tokenized central-bank money, commercial-bank money and tokenized assets, rather than assuming blockchain technology simply replaces the existing monetary system.
That distinction matters. We are likely to see digital assets become part of the financial plumbing rather than sitting off to the side as a separate “crypto” system.
The CLARITY Act fits into that transition as well. Congress is beginning to establish a statutory framework for digital assets while regulators work through the implications for banking, payments, securities and commodities.
Over time, the bigger story may have very little to do with the word “crypto.” Payments, securities issuance, trading, collateral management and settlement could all become increasingly programmable. Once that happens, the line between a financial asset and the infrastructure supporting it starts to blur.
What would a successful U.S. digital-asset regulatory framework look like to you—not simply in terms of protecting investors and preventing misconduct, but in creating a market in which responsible innovation and institutional participation can develop sustainably?
I would not measure success by whether we end up with more regulation or less regulation. I would ask a more practical question: have we created rules that sophisticated institutions can actually build businesses around?
That starts with clear jurisdictional boundaries among the SEC, CFTC and other regulators. It also means distinguishing genuine securities from other digital assets instead of treating the entire asset class as if it were one thing.
There should be strong protections around custody, conflicts of interest, market manipulation and disclosure. At the same time, the framework has to leave room for new technology. We should not require every new financial product to fit perfectly into a regulatory structure designed for a different market.
And there is a broader policy issue: keeping legitimate financial innovation in the United States.
That is why I think the CLARITY Act is important, regardless of whether someone agrees with every provision. The fact that Congress is debating these questions is itself a significant change from the period when many of them were being worked out primarily through enforcement actions.
But I would be careful about declaring victory. The Senate has not yet passed the bill, and difficult negotiations remain. It will also need substantial bipartisan support.
So I would describe the United States as moving from regulatory ambiguity toward a statutory framework, not as having finished that transition.
Ultimately, good regulation should produce a market that is safe enough for investors, predictable enough for institutions, flexible enough for innovators, and competitive enough for the United States to remain a leader in financial technology.
