Former SEC Enforcement Expert’s Crypto Paper Sparks 200K Views on X,Fuels TradFi Shift

A research paper titled "Crypto and the Evolution of Capital Markets" has garnered significant attention on X, accumulating over 200,000 views and nearly 1,000 likes within hours of its publication. The paper not only garnered strong support from the crypto community but also caught the attention of traditional finance professionals. Haseeb Qureshi, founder of Dragonfly, shared that he had printed the paper for in-depth study, captioning his post with an enthusiastic “LFG” .

Beyond its academic rigor, the paper carries significant symbolic weight: it reflects a growing regulatory acceptance of blockchain technology. Its author, TuongVy Le, a former SEC Enforcement Division senior counsel, handled some of the agency’s earliest crypto investigations, which partly explains the post’s viral traction despite her modest following of under 10,000.

The paper's viral success coincides with Coinbase’s landmark inclusion in the S&P 500 index, marking a pivotal moment for cryptocurrency's mainstream acceptance.

The paper argues that blockchain technology and tokenization can address inefficiencies in traditional securities markets, acknowledging that while crypto tech isn’t flawless, its benefits make it worth adopting. Le writes, “Blockchain and tokenization represent a natural evolution of the capital markets, the same way the move away from paper stock certificates did, half a century ago.”

Echoing this sentiment, current SEC Commissioner Hester Peirce has expressed similar views, advocating for the use of distributed ledger technology in issuing, trading, and settling securities.

Some community members quipped, “With the SEC showing support, is the springtime for crypto far off?” Amid the market’s daily ups and downs, we delved into the paper to offer a broader, macro-level perspective for our readers.

An Insider’s Take on Crypto

TuongVy Le’s background adds weight to her arguments. She spent nearly six years at the SEC, rising to Chief Counsel in the Office of Legislation and Intergovernmental Affairs, engaging with Congress and the Treasury on digital asset policies. During the 2021 GameStop saga, when retail investors clashed with Wall Street, exposing vulnerabilities in traditional markets, Le was at the SEC, helping navigate the crisis and contributing to market structure reforms.

After leaving the SEC, Le joined Bain Capital Crypto as a partner, briefly served as legal counsel at Worldcoin, and now acts as General Counsel at Anchorage Digital, the first crypto firm to receive an OCC federal banking charter.

With years of experience spanning financial regulation, traditional finance, and crypto, Le brings a uniquely comprehensive perspective. She understands the unspoken rules of regulation while also grasping the innovative dynamics of the crypto space—a rare combination that sets her apart from many in the industry. As someone with such credentials, her paper advocating for the integration of blockchain technology into traditional capital markets serves dual purposes: it aligns with her current role in crypto asset management while leveraging her influence to foster a more positive view of crypto among her former SEC colleagues.

The Overcomplicated World of Capital Markets

Le’s paper uses a satirical cartoon, The Self-Operating Napkin, to illustrate overcomplexity: a comically intricate device performs the simple task of wiping one’s mouth, mirroring the inefficiencies of securities trading. Traditional trading involves multiple intermediaries—brokers, clearinghouses, and transfer agents—adding friction and fees. Le notes this structure emerged from the 1960s “paperwork crisis,” when paper stock certificates couldn’t keep up with rising trade volumes, leading to delivery failures and brokerage collapses.

To resolve this crisis, markets adopted more complex clearing and settlement systems, introducing additional intermediaries and regulations. While this mitigated the immediate issue, it created new inefficiencies. Individual investors must rely on brokers to execute trades on exchanges, introducing principal-agent risks—brokers may overtrade or recommend unsuitable investments to maximize their own profits. National securities exchanges and alternative trading systems (ATS) must adhere to intricate rules to prevent inferior pricing, but these rules are often difficult to enforce in practice. Clearinghouses and transfer agents add further layers, causing settlement delays and increasing counterparty risks, all of which require additional intermediaries to ensure finality.

Le argues that this redundancy stems from policy choices made in an era of limited technology. If paper stock certificates could be phased out, she posits, the current trading system can also be replaced with more efficient alternatives.

Are CEXs Better Than Stock Exchanges?

While acknowledging crypto’s challenges—such as private key loss or flawed smart contract design—Le proposes a bold idea: peer-to-peer (P2P) trading and centralized exchanges (CEXs) can, in some ways, outperform traditional securities markets. CEXs enable direct trading without brokers, reducing costs, and settle trades instantly, eliminating T+1 settlement risks and the need for clearing agents. CEXs also operate 24/7, enabling users to react to market changes in real time, minimizing liquidity gaps and price inefficiencies during non-trading hours. Additionally, users can withdraw crypto assets to self-custodial wallets, granting direct ownership—a stark contrast to the indirect ownership in traditional markets.

However, Le cautions that CEXs have their own issues, including risks of custodial mismanagement, hacks, insider trading, and regulatory gaps. Her argument, illustrated with straightforward diagrams, boils down to using technology to eliminate excessive intermediaries. It’s a striking perspective—rather than adopting a hardline stance against crypto, a former SEC enforcement expert is advocating for its best practices to reform securities markets, a view that feels almost unprecedented.

A Step Toward Mainstream Adoption

While the paper doesn’t directly address the regulatory stance on crypto assets, its publication and viral spread send a positive signal, potentially encouraging incumbent regulators to embrace blockchain technology rather than view it as a threat. The paper offers a refreshing sense of certainty in a volatile market: blockchain technology is no longer a niche experiment but has the potential to break into the mainstream, serving as a new engine for traditional financial markets. The future of the crypto industry looks promising.