Institutions have stepped in, but crossing the adoption chasm still requires more. With regulatory clarity emerging, the focus now is on increasing momentum to cement public blockchains as core financial infrastructure.

Over the past few weeks, we've spent a lot of time with institutions to understand why adoption of financial products on public blockchains remains limited.

We believe trusted intermediaries (banks and other financial market infrastructure) remain necessary to the future of finance. These intermediaries, who provide essential services like key custody, verifiable credential issuance, and high-value lending, can leverage public blockchains to add superpowers to their financial products, such as instant settlement, global distribution, and composability.

We refer to these key institutions as “regulated users”.

Citigroup forecasts annual transaction activity for both stablecoins and bank tokens could each top $100 trillion by 2030, which is impressive, but still small relative to the daily money flows from leading regulated banks, which can exceed $5-10 trillion.

As the diagram illustrates, blockchains now undoubtedly provide a solution to the global market for digital assets, but their current scale remains minor compared to traditional, regulated banking solutions.

Increasing the level of economic activity on public blockchains requires policymakers in major jurisdictions to continue establishing clear rules for building and using the technology.

Policy makers (in the U.S.) are basing the need for regulatory oversight of public blockchains upon the level of independent control that exists in the blockchain system. When a public permissionless blockchain lacks independent control it is essentially just software, and software should not be regulated. On the other hand, when someone retains independent control of the public permissionless blockchain, they are acting as an intermediary and should be subject to regulation.

By this logic, public blockchains and their underlying software applications do not automatically fall outside the purview of global lawmakers and regulators. Important facets, such as open-source licensing and upgrade rights distributed across an uncorrelated group of admins, must be assessed to determine the level of control and risk.

We strongly believe and advocate that mature blockchain systems like Ethereum should remain outside of regulatory purview. Institutional users will continue to pool resources on battle-tested public blockchains that lack independent control.

However, we acknowledge that the majority of economic activity are happening within compliant infrastructure and applications. We think the convenience provided by intermediated financial services will continue to be desired by consumers and businesses. These intermediaries choose to build on public chains for resilience, superior settlement, composability, and distribution, but have the business requirements and capabilities to explicitly comply with local laws and regulations.

In order to make the critical policy updates required to accelerate regulated user adoption, the industry must work collaboratively with policymakers across all political parties.

Fortunately, U.S., blockchain legislation is making undeniable progress.

GENIUS Act

The GENIUS Act became law in July 2025. It allows regulated, licensed institutions to issue "payment stablecoins" on public blockchains. The U.S. Treasury Department is currently drafting rules to onboard these licensed institutions. Treasury has one year from the signing date (July 18, 2025) to create a working application process for license applications.

CLARITY Act

The CLARITY Act, for crypto market infrastructure, passed in the U.S. House of Representatives in July 2025. Under CLARITY, technology that is open source and not independently upgradeable is referred to as a mature blockchain system. The act calls for increasing the level of regulatory scrutiny along with the level of independent control of the blockchain system. This aligns with the majority of today’s existing financial market regulation, which protects users from the bad outcomes of poor financial risk decision making by human intermediaries. Mature blockchain systems are not without risk; but, they are without human intermediary risk.

Senate Banking Committee’s discussion draft on market structure

The Senate Banking Committee’s market structure discussion draft does not mention blockchain maturity, and instead focuses on recognizing the different risks and benefits between centralized firms, decentralized finance protocols, and non-custodial software platforms.

The Senate’s version of market structure is centered on the concept of an ancillary asset—digital assets distributed in connection with an investment contract, when traded in primary markets, such as for the purpose of raising capital. Ancillary assets traded in the secondary market would not be considered securities. Essentially, this is a way to legally separate the investment contract (which is a security) from the underlying asset itself (which is not). Ancillary assets and their issuance would be overseen by the SEC.

Senate democrats propose DeFi oversight

A proposal out of the Senate from Democrats would require DeFi front-end applications to register with the SEC or CFTC and bring them under rigorous KYC rules and Treasury oversight.

Senate Agriculture committee’s market structure discussion draft

The Senate Agriculture committee’s market structure discussion draft published in November 2025 provides a clear definition of digital commodities and the establishment of a spot market digital commodity regulatory regime with the CFTC. It also provides a definition of a digital commodity, that is separate and distinct from a digital security futures and a payment stablecoin, and proposes a framework for excluding decentralized finance trading protocols (predetermined rules and lack independent control) and a decentralized governance structure (that lacks independent control) from direct regulatory oversight.

It also ensures that "non-controlling" blockchain developers are not treated as money transmitters. This distinction allows open source software developers to build tools like privacy solutions without fear of violating federal law.

A primary challenge we hear from institutions is the impossibility of complying with anti-money laundering (AML) and counter terrorist financing (CFT) laws on public blockchains and permissionless DeFi.

The GENIUS act called for a “60 day public comment period…” to identify innovative or novel methods, techniques, or strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity, such as money laundering, involving digital assets…”

The industry submitted 216 comments with detailed problems and solutions for better combating AML and CFT on public blockchains.

Calls to update existing illicit finance laws in the U.S., such as the BSA and PATRIOT act, are supported in the President's Digital Asset Working Group report on blockchain from July 2025, as well as the Senate Banking Committee’s discussion draft on market structure from the same time period.

Taken together, this legislative and rulemaking momentum is building the essential bridge for regulated users to access public blockchains. The GENIUS Act charts a clear path for compliant, regulated money, while broader administration efforts adapt critical AML/CFT laws for the digital age. The CLARITY Act and the Senate drafts further define the assets (as "ancillary assets" or "commodities") and, crucially, establish that the underlying infrastructure—like "mature blockchain systems" and true "decentralized finance protocols"—are separate from the regulated intermediaries that use them.

This comprehensive shift—from regulating the technology to regulating the actors and modernizing the rules—is the final piece of clarity institutions needed to begin their on-chain adoption in earnest.

Any public blockchain-based financial product built for corporate users is incomplete without privacy. Corporations are obligated to protect trade and business strategy, as well as customer data.

A key industry requirement has been that any change in policy should be grounded in the user’s right to transact privately, and novel techniques for effectively combating illicit activity on public blockchains should assume transaction privacy exists for users. However, many of the discussions and proposed solutions around AML/CFT compliance on public blockchain assumes account activity remains transparent for public viewing. A mindset shift from default-publicly-viewable to default-private/-need-to-know is necessary for sensible blockchain policy.

The ability to independently verify public blockchain ledgers is a key mechanism that makes public blockchains so useful. It also makes privacy difficult. The industry has invested heavily here and solutions from Aztec, ZK Sync Prividium, Aleo, Canton Network are beginning to come to market.

For nearly a decade, the industry has been building public blockchain infrastructure and DeFi that serve users worldwide, often in spite of regulatory headwinds.

Now, the moment has come to align policy and development. Public blockchains must evolve into bipartisan technology to fulfill their role as global financial infrastructure. The winners of this next phase will be those solving privacy and compliance at the infrastructure layer.

At Radius, we’ve building exactly that: compliant, institutional-grade solutions that empower financial institutions to build and operate on public blockchains.

Contact our team to learn how Radius can help unlock the next trillion dollars in onchain value.