Genna Garver is joined by David Labhart from ACA Group to discuss the dynamic landscape of digital assets and blockchain technology.
In this episode of the Crypto Exchange, host Genna Garver is joined by David Labhart from ACA Group to discuss the dynamic landscape of digital assets and blockchain technology. David, who brings extensive experience from his previous role as an attorney advisor at the SEC, shares insights on the evolving regulatory environment surrounding digital assets. The conversation highlights the increasing importance of digital assets for traditional investment managers, including private fund managers, as the U.S. financial markets move toward blockchain integration. Genna and David explore the implications of recent regulatory developments, such as the GENIUS Act, which establishes a framework for payment stablecoins, and the SEC's approval of the first crypto exchange-traded funds under new listing standards. The episode emphasizes the growing demand for digital assets and the transformative potential of tokenization across various investment classes. Additionally, they address the challenges compliance professionals face in adapting existing regulatory frameworks to accommodate digital assets, stressing the need for clarity on their classification as securities, commodities, or other categories.
The Crypto Exchange — Navigating the New Frontier of Digital Assets and Tokenization
Host: Genna Garver
Guest: David Labhart
Aired: October 9, 2025
Genna Garver (00:03):
Welcome to another episode of The Crypto Exchange, a Troutman Pepper lock podcast focusing on the world of digital assets. I'm Genna Garver, one of the hosts of The Crypto Exchange, and a partner in Troutman Pepper Lock's Investment Funds And Investment Management practice and co-leader of the firm's Digital Assets and Blockchain team. Before we jump into today's episode, let me remind you to visit and subscribe to our blogs, TroutmanFinancialServices.com and ConsumerFinancialServicesLawMonitor.com. And don't forget to check out our other podcast on Troutman.com/Podcasts. Today I am joined with David Labhart, senior principal consultant at ACA group to discuss what traditional investment managers, including private fund managers, need to know about digital assets and efforts to move US financial markets onto the blockchain. David, who recently joined ACA, brings a wealth of experience in digital assets before joining ACA. He served as an attorney advisor at the SEC where he provided legal advice on crypto assets, digital assets, and blockchain technology. He also conducted examinations of registered entities focusing on crypto assets. And prior to joining the SEC, David worked in a number of compliance roles most recently as Global head of Enterprise compliance for S&P Global. David, thank you for joining me today.
David Labhart (01:36):
Thank you. It was very nice to be here.
Genna Garver (01:38):
So David, so much is happening.
David Labhart (01:40):
Yes, very much.
Genna Garver (01:41):
Can we just start off by having you share with us your experience at the SEC advising on digital assets and blockchain technology? What were you brought in to do?
David Labhart (01:52):
My experience with the SEC was to come in as the attorney advisor to a newly founded team called the Crypto Asset Specialized Examination Group within the division of examinations. And our focus was really on any of the SEC registrant populations that we had authority to conduct examinations on with a primary focus on firms that are trading in digital assets or firms that are trading in digital asset derivatives. For example, the ETP products that were recently launched,
Genna Garver (02:21):
The digital conversation is moved so far away from mere meme coin chats on YouTube and Reddit. Right.
I mean, this summer the president signed the GENIUS Act into law and that established a payment stable coin regulatory framework. And since then congress has been working on passing crypto market structural legislation and I think they hope to do so by the end of the year. So we've seen an onslaught of DATs or digital asset treasury companies, and now as of last week, the SEC approved the first crypto exchange traded funds under the new predetermined listing standards to even speed up those ETPs. So if you're a traditional fund manager, private equity fund manager, let's say, does any of this noise really impact your daily? What are you hearing from your clients?
David Labhart (03:11):
I think to a degree it is the ETP products. The ETF products that you mentioned. I think we are seeing significant demand in the industry. So keeping up with that demand from investors, from clients is something that I think a lot of managers have to deal with and have to understand the underlying products and what the ETPs actually represent. So from that aspect, I think a lot of managers have to think about how this might fit into their portfolios just based on demand. I think though that this is going to be a growing space. As you mentioned, the demand from legislation regulatory chairman Atkins has made various statements about wanting the United States to be one of the leaders in digital assets and crypto assets. So I think this is coming and change is coming. Even the recent regulatory sprint that the SEC has talked about, their regulatory agenda for 2025 is very heavily focused on digital assets and the changes that they would like to see to make digital assets more readily available to investors and funds alike.
Genna Garver (04:16):
That's a great point. I think that regulatory flex agenda gives us a really good view as to how the regulator is moving forward. And I actually think the big deal is in the move towards using distributed ledger technology for affecting and recording market transactions generally. So that could include possibly using stable clients to pay service providers or employees and tokenizing fund interests. So I wouldn't like that piece of this has legs that's similar to the market advancements that we saw in the late 1990s for those of us who are around when we had outdated paper-based clearance and settlement systems that moved to electronic trading systems. And now for example, most equities are held DTC in street name and that was revolutionary at the time, but it seems especially from chair Atkins statements, that this next leap of moving things on to the blockchain, we could start to see that in a regulatory flex agenda including proposals on amendments to rules for transfer agents. And at the end of the day, I mean we're really just talking about a better way of record keeping and I mean that's a very basic view. I know, but tokenization is all the rage, right? I mean that's really…
David Labhart (05:49):
Absolutely.
Genna Garver (05:49):
…Where I think the action's going to be at for these what we call tradify managers. So let's talk about that.
David Labhart (05:56):
Yeah.
Genna Garver (05:56):
How would you describe tokenization?
David Labhart (05:58):
I think tokenization, like you said, has transformative abilities for the market. I think what we saw when we went from paper tickets to electronic trading and algorithmic trading in the markets is I think we could see something similar with tokenization. So I think the potential is really there. I think we haven't quite accomplished that yet because of some of the regulatory uncertainty and lack of clarity around that. But tokenization has, in my view, the ability to really democratize investment across a number of different types of investment classes, not just equities or ETPs, but bond markets and commodity markets. You can even envision a world where we're trading in art that has been tokenized or really any real world asset can be put on a blockchain and represented by a unique token. So that ability to take investments like private debt for example, that may have been predominantly with institutional investors or large qualified investors with tokenization, you have the ability now to fractionalize that and offer it to a broader audience of retail investors where now the investment is much lower and much more available to investors across a much broader spectrum.
Genna Garver (07:17):
It's fascinating because we actually are working on a podcast on tokenization. It really, the technology, it's mind blowing for those of us who have been around since what are now, I guess considered the dark ages before the internet, but to see all of the various applications and how it could sort of creep into the daily for a traditional finance person. I mean, this is sort of the messaging we're even doing internally trying to explain this is not a separate practice group. This is an octopus that reaches across the spectrum into everyone's daily life. And I think tokenization of securities in particular is more than just a fancy stock certificate. It's more of the ease of the process and instant gratification. I don't know how gratifying it's going to be when we're all focusing on 24/7 trading. I think we're going to be exhausted.
David Labhart (08:17):
Yes, yes.
Genna Garver (08:18):
I keep joking, this is a good time to be long caffeine because I just cannot imagine exactly what that world looks like, although I guess arguably it's kind of like that now. So we've seen this particular area of tokenization of securities I think is really moving fast, and a few weeks ago, NASDAQ requested approval from the SEC to enable trading of tokenized securities. Listen on the exchange starting in 2026 was, by the way, is what, four months away? I mean it's basically here.
David Labhart (08:50):
It's not very far.
Genna Garver (08:51):
I know. I'm like, are we ready for this? My mind is racing. All I could think of is like custody solutions and all these other freaking problems. From a regulatory perspective, how are various jurisdictions approaching tokenization? Are we even there?
David Labhart (09:06):
For me, it's hard to see that 2026 is realistic. It's like you said, it's a few months away in terms of a lot of changes need to happen around regulatory changes. Clarity, you mentioned custody. I think custody is one of the first pins that have to fall in understanding how firms can use tokenized securities in a safe way. And so we have more clarity around custody and whether self custody is a viable solution regulatorily for firms, or whether we are going to even have custody solutions for some of these tokenized assets. I think that is one of the first dominoes that has to fall. I think globally really it seems like Europe and Asia are competing for dominance in this space right now. You see in the EU, they've created the regulatory sandbox, their blockchain sandbox that allows firms to, in a safe way, interact with regulators and look at innovation and how that fits into a regulatory framework.
You've seen very similar sandboxes in Asia with the Hong Kong monetary authority uses a sandbox as well. Singapore has also, through working directly with the industry, has really focused on tokenization and how that can be brought into the markets and some of these date back to 2023, 2021. So they're a little bit ahead of us in terms of a regulatory framework around tokenized assets and how they're going to be used and doing that in a safe regulatory way. I think though that's something Atkins talked about in one of his recent speeches. Chairman Atkins very much wants the US to come to par with some of these countries, and in fact, from his perspective, there are firms lining up to do this kind of tokenization and working with the SEC to figure out how to do it in a regulatory way. So I think it's coming. I think we're just a little bit behind and I think we're going to see a lot of action in this space to get caught up quickly.
Genna Garver (11:02):
Yeah, it does seem like while a lot of activities been happening offshore for the past decade, that behind the scenes a lot of institutional firms at least have been laying the pipeline, putting the infrastructure in place so we can have this unlock moment. And with the passage of legislation this summer and more expected, and I mean a lot of these rules, particularly disabled coin legislation rules need to be basically done within the year. So first of all, take your vacation now because this spring is going to be rulemaking freaking nightmare. Right? That's what I keep thinking.
David Labhart (11:39):
Yes, exactly.
Genna Garver (11:40):
But I think what we really need to see, especially in terms of how this impacts traditional finance, is something a security, is it a commodity? Is it something else? And the reality is, regardless of how digital assets will ultimately be classified by Congress through legislation here in the us, traditional investment management firms are going to need clarity on how those assets fit within their existing regulatory framework and compliance programs. So for example, we've seen questions from clients on including digital assets in the calculation of network tests for qualified clients and qualified purchasers under the securities laws, as well as questions on including digital assets in outside business activity and personal securities transaction reporting and approval requirements. So from a compliance perspective, what should traditional investment management firms be thinking about right now? Are your clients struggling with interpretive concerns regarding the application of their existing compliance program?
David Labhart (12:58):
I think you really hit on one of the areas that they're struggling the most is what are these things still, unfortunately, we're still trying to figure out what is a security, what's a commodity and what is a mean coin or a collectible or something else, some other category that may not be a commodity or a security. I think the commission has been clear that that is something they want to solve sooner rather than later. But you mentioned one of the areas I get the most questions about is code of ethics. Conflicts, controls, personal trading. How do we fit digital assets and crypto assets into that policy? Is it a security? Is it something that we need to monitor? And if we do need to monitor it, how do we do that? Because the anonymous nature of digital assets make it much more difficult to do than traditional securities, so there has been a lot of struggle with that. Also, you mentioned how you treat them for other purposes. One of the areas is assets under management is a digital asset or a crypto asset, a asset under management for purposes of regulation, for purposes of putting on your A DV, and that is still in my mind at least unclear as to certain assets and whether you're qualified to register with the SEC or need to register with the SEC as an investment advisor, whether you have the sufficient assets under management to do that or whether you need to register with the states.
Genna Garver (14:24):
This is something that I find fascinating. So let's fast forward nine months and let's just assume that we have the issuance of permitted payment, stable coins, and let's just say that maybe a advisory client, like a private fund, this is the easiest example, has some permitted payment, stable coins held as a cash equivalent, and there's actually some provision for the treatment of those permitted payment stable coins as cash and cash equivalents for certain purposes under the legislation. But for a UM purposes, if you can include cash and cash equivalents in your regulatory assets under management, would you be able to include permitted payment stable coins? It's just so fascinating beyond if you hold your favorite crypto asset in your portfolio for investment purposes, there are so many other implications, and that's just one question, right?
David Labhart (15:25):
Yeah.
Genna Garver (15:26):
There's so much,
David Labhart (15:27):
And not to complicate things even more, but you have activity that can't be done in traditional finance like liquidity pools and staking activities. Where does that fall? What if I'm holding a non-security asset, but I'm putting that in a liquidity pool or I'm staking that asset with a third party provider? Does that make me now qualified or needing to register with the SEC? And we've gotten guidance on liquidity pools. We've gotten guidance on some of these things, but I'm not sure that the guidance is enough yet to make that determination for some of the firms that are doing some of the more complex or unique types of trading that digital assets allow for.
Genna Garver (16:09):
Yeah, I think that probably one of the most important statements we've received from commissioner person is that just because you tokenize something doesn't change the nature of that thing in terms of whether or not it's a security, and if you think of it as more of a technology like holding or moving that interest on chain does not in and of itself change the nature of that asset from a security. And so I would think a similar analysis would apply for activities with respect to that asset such as staking, but then maybe what you own is, I happen to know that with staking it's really locking up the asset, but we get into some of these questions, for example, with repos or securities lending. There are examples in the real world with real assets that we've dealt with before, and this is just the defi version, but still getting clear guidance on these points would be great, but at least in the meantime for clients to understand where the potential issues are in their business and what their personal risks are, I think is critical.
David Labhart (17:30):
Absolutely. You mentioned the NASDAQ request for rulemaking and to trade tokenized assets, tokenized equities and ETP products, and I think that's a very interesting rulemaking proposal because it tries to treat traditional settlement and back office treatment of assets and tokenized assets on the blockchain tries to treat in the same way so that you're receiving the same rights and the same guarantees that you would get in a traditional equity setting. And that solves a lot of the issues around regulatory frameworks because they're fitting digital assets into an existing regulatory framework. It doesn't create issues around how do we settle the national best bid and offer for these, or what are the rights you're getting with these? Because under the rulemaking, it's treating them exactly the same. There are other ways to do tokenization that don't do the same thing that NASDAQ is trying that do, fracture the market more, do allow for 24 7 trading outside of the normal framework. There's going to be very interesting, which path the market is going to adopt and which path I think ultimately prevails with regulators.
Genna Garver (18:41):
I think NASDAQ even said, and their requests that while they're currently exploring using DTCs method for trading, that there might be other providers, and I know there are a number of providers out there that will, for example, take your fund and tokenize its interest. And for the most part, let's presume we're talking about private funds. I think in general, people need to understand the benefit they're receiving by tokenizing fund interests today. I mean, it makes sense for some of the larger funds out there that, for example, maybe they're close ended and there are a lot of secondary transactions and what have you, and just kind of getting a handle on the limited partner ledger or shareholder ledger. Maybe there is a purpose for that, but by rushing out and selecting any old provider, there's no certainty that the platform chosen will be plug and played into whatever the new market structure becomes. So I do think that there is still a lot to be determined, and we'll probably see a lot of consolidation amongst the providers in this space. But there are immediate impacts on compliance programs as we discussed, primarily with respect to conflicts of interest and code of ethics issues.
David Labhart (20:22):
And I think this is something that firms need to start thinking about now because I don't think the tokenization train is slowing down. If anything, it's going to speed up. Compliance teams are going to start hearing from management that they want to move into this in some degree, whether it's full intuit or just pieces. Even in the us we do have tokenized money market funds now, and that seems to be picking up a little of steam as well as some of the larger firms are moving into tokenization and doing it in, I think a very measured way by moving into money market funds first. But in my mind, at least that's a test for future tokenization and broader adoption of tokenization. I think it's just the beginning. I think most firms tokenization is going to over the next year, touch their business in some way, and so it's important that I think compliance professionals start to understand tokenization and how that could impact their business, where that could create conflicts, where that could impact their code of ethics, where that could hit on some of their surveillances and some of the work they're doing to make sure that the trading is compliant with regulation.
All of that is going to change over the next few years in terms of how we're looking at distributed ledger technology and using distributed ledger technology. So understanding what's coming, starting to get prepared for what's coming are all things I think compliance professionals should really start to do.
Genna Garver (21:46):
Sounds like it's a good topic to include annual compliance training.
David Labhart (21:52):
Yeah, absolutely.
Genna Garver (21:53):
David, thank you so much for joining us today. I hope you'll come back as we see new regulations and other developments in this space, so you can keep us up to date. Thanks to our audience for listening to today's episode, and don't forget to visit our blogs and subscribe so you can get the latest updates. Please also make sure to subscribe to this podcast via Apple Podcast, Google Play, Stitcher, and whatever platform you use, and we look forward to our next episode.
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