2026 Outlook: Modernizing Financial Regulation, Unlocking Responsible Innovation

By John Zecca, Executive Vice President and Global Chief Legal, Risk and Regulatory Officer

As 2026 begins, financial markets are experiencing a pivotal period marked by rapid technological advancement and an increasing awareness of the need for regulatory frameworks to evolve in tandem with the dynamic economy they support. At the same time, the scope of what shapes market health has expanded far beyond the traditional boundaries of trading venues and listing standards. Modern market structure now depends on a much broader ecosystem—capital formation pathways, digital‑asset infrastructure, data and technology governance, and the stability of the banking system itself. As Nasdaq has grown beyond an exchange, we have a wider view into the entire financial ecosystem, and this has informed our view that the interconnectedness of the system requires a holistic view for regulatory modernization. Across Washington, policymakers are signaling a shift toward growth‑oriented regulation, building on early progress to reduce friction, strengthen capital formation, and support innovation across the financial system. The debate has shifted. The question before us is no longer whether modernization is needed, but how to deliver it responsibly, at scale, and with lasting impact.

This moment reflects a broader truth: innovation has long flourished even in heavily regulated markets, but the speed and complexity of today’s transformation demand a different regulatory posture—one that is simpler, clearer, and anchored in the realities of how markets actually function. Digital assets, tokenization, AI‑enabled analytics, and real‑time risk management are no longer hypothetical concepts at the edges of financial services; they are moving to the center of how markets operate, compete, and evolve, as well as how companies, investors and market participants interact. Yet our regulatory architecture has not kept pace. Fragmented oversight and outdated rules continue to constrain adoption, raise costs, and hold back the full potential of modernization.

The strategic imperative for 2026 is therefore unmistakable: modernize financial regulation to unlock responsible innovation. Achieving this requires more than removing friction—it requires embracing technology‑neutral principles, strengthening investor protections through transparency and resilience rather than prescriptive constraint, and designing rules that encourage long‑term investment rather than inhibit it. Done well, modernization can expand access to capital, safeguard market integrity, and reinforce America’s role as the global leader in financial services while ensuring the system remains safe, trusted, and prepared for the future.

Progress this year will depend on converting momentum into execution across capital formation, emerging technologies, and bank modernization so that regulation evolves in lockstep with innovation, not behind it.

Capital Formation: Turning Momentum into Execution

Capital formation provides the clearest window into what is possible. In 2025, policymakers and regulators coalesced around a shared conclusion: while U.S. markets remain the strongest in the world, the public‑company experience has become too complex, costly, and unpredictable—especially for smaller and growth‑stage companies. Nasdaq’s Capital Formation White Paper captured this moment, highlighting both the structural challenges facing issuers and the broad consensus forming around the need for smarter, more workable reform. The task for 2026 is to turn that consensus into action.

At the center of this effort is the need to simplify the public company experience. Early progress has shown that modernization can enhance transparency, reinforce investor protections, and strengthen market integrity. But restoring the vitality of public markets requires sustained effort and a commitment to recalibrating—not dismantling—the core protections that allow markets to function. Public markets thrive when rules are clear, proportionate, and aligned with how companies grow and communicate today. Over time, however, overlapping requirements—many sensible on their own—have accumulated into obligations that often discourage companies from going public or remaining public. Correcting this does not weaken protections; it strengthens them by focusing regulatory energy on what is truly material.

Three areas stand out as essential to that recalibration.

• First, strengthening and modernizing the proxy process. 
  Shareholder engagement is a defining strength of public markets, but the proxy ecosystem has grown increasingly complex, opaque, and costly for public companies and their shareholders. Reform efforts underway reflect a shared goal: preserving shareholder voice while improving transparency, accountability, and accuracy across the system. In 2026, progress will depend on ensuring the proxy process facilitates informed, long-term decision making rather than introducing unnecessary cost and distortion.
• Second, advancing scaled disclosures that reflect company size and maturity. 
  Disclosure remains fundamental to investor protection, but a one size fits all approach imposes disproportionate costs on smaller and midcap issuers while offering diminishing returns to investors. Momentum is building around more tailored frameworks that maintain core information while reducing noise and compliance strain. Making meaningful progress here would improve disclosure quality and lower barriers to entry without weakening trust in the markets.
• Third, addressing litigation risk that undermines predictability. 
  The risk of excessive or hindsight driven litigation has become a structural deterrent to public company participation, influencing both IPO decisions and ongoing communications with investors. Thoughtful litigation reform–focused on proportionality and clarity–can enhance market confidence by enabling companies to engage transparently with investors while preserving accountability.

Together, these reforms represent a practical test of regulatory modernization: whether the system can evolve to support innovation, growth, and long-term investment while maintaining the safeguards that underpin market trust. For capital formation, 2026 presents a clear choice–build on early momentum with decisive action, or allow complexity and uncertainty to continue eroding participation in public markets at a time when access to capital has never been more critical.

Digital Assets: Building the Next Era of Markets with Trust and Integrity

The same execution‑oriented mindset now applies to digital assets, where the conversation has shifted decisively from whether regulation is needed to how best to design it. Digital assets offer one of the most significant opportunities in decades to modernize market infrastructure, expand access, and drive efficiency. The past year brought encouraging progress as lawmakers and regulators began converging around clearer frameworks and more constructive engagement with the private sector. That shift—away from uncertainty and toward a more predictable regulatory path—has created the conditions for responsible, scalable innovation.

As the ecosystem matures, however, the next phase must be guided by principles that ensure digital assets strengthen–rather than fragment–the markets they are meant to modernize.

• First and foremost, investor protection must remain the north star. 
  Trust is the foundation of any successful market, and digital asset frameworks must deliver the same core protections investors expect elsewhere in the financial system: transparent disclosures, sound market conduct, strong custody standards, and effective oversight. Regulation should not be designed to advance any single business model or technology. Instead, it must be grounded in outcomes that protect investors and preserve market integrity, regardless of how innovation evolves.
• Second, the digital assets ecosystem needs a level, technology neutral playing field. 
  Markets function best when participants compete under clear and consistent rules. Regulatory frameworks should enable fair competition across platforms, intermediaries, and market participants–allowing innovation to flourish based on merit rather than regulatory advantage. Clear, harmonized standards reduce uncertainty, encourage responsible participation, and help attract long-term investment into the ecosystem.
• Third, tokenization, particularly of real world assets, requires a whole of industry approach. 
  Tokenization holds meaningful promise to improve efficiency and accessibility, but its development must prioritize market structure, issuer clarity, and liquidity. Issuers need certainty around rights, governance, and compliance obligations, and investors depend on deep, resilient pools of liquidity to support price discovery and stability. Fragmented approaches to tokenizing equities risk splintering liquidity and undermining the strengths of public markets rather than enhancing them.

Taken together, these principles point to a broader conclusion: digital assets will succeed not by disrupting market fundamentals, but by reinforcing them. With thoughtful regulation, strong engagement between the public and private sectors, and a commitment to investor trust, digital assets can help modernize the financial system in ways that are scalable, resilient, and sustainable.

A similar approach is needed for AI. While the technology promises extraordinary gains in efficiency and detection quality, particularly in surveillance and financial‑crime prevention, institutions need clarity on responsible deployment, governance structures, and expectations for explainability. Smart rules can accelerate adoption by providing the certainty that enterprises require to invest at scale.

Banks and Financial Institutions: Simplifying Regulation to Support Growth and Stability

If capital formation and digital assets define how markets evolve, banks and financial institutions determine whether that evolution is sustainable. They anchor credit creation, payments, risk management, and the resilience of the financial system. A strong, well‑regulated banking system is not a luxury; it is a prerequisite for growth. Yet years of layered regulatory requirements—often introduced in reaction to short‑term events—have created operational complexity that consumes resources without always delivering commensurate risk reduction. Increasingly, institutions are forced to prioritize compliance mechanics over risk management, innovation, and customer needs.

For 2026, the challenge is not whether regulation is necessary, but how to design a smart framework that safeguards stability while enabling banks to deploy capital, invest in innovation, and support the global economy. Three areas highlight where modernization can deliver the greatest impact:

• First, refocusing compliance frameworks on outcomes, not process. 
  Antimoney laundering provides a clear example. Protecting the financial system from illicit activity remains a core public policy objective, and vigilance must remain high. Yet the current AML framework often prioritizes volume, duplication, and defensive reporting over risk-based prioritization and effectiveness. Modernizing AML regulation–by focusing on high-risk typologies, enabling better data sharing, and supporting the responsible use of advanced technology–can strengthen enforcement outcomes while significantly reducing unnecessary operational burden. Done well, this shift would improve system integrity and free institutions to invest in capabilities that deliver real impact.
• Second, simplifying and clarifying prudential regulation. 
  Recent efforts to update capital standards underscored the costs of excessive complexity and insufficient coordination. The process surrounding the current Basel framework highlighted how prescriptive, layered rules–implemented unevenly across jurisdictions–can create uncertainty, constrain credit availability, and amplify operational risk without clearly enhancing resilience. As regulators consider the future of bank capital and supervision, simplification and transparency should be treated as features of effective regulation, not tradeoffs against safety and soundness.
• Third, advancing global harmonization without undermining flexibility for growth and innovation. 
  Divergent national implementations remain a significant source of complexity for globally active institutions and can distort competition without improving financial stability. Greater alignment across jurisdictions is essential to reducing fragmentation and supporting cross border resilience. At the same time, harmonization must allow individual financial systems the flexibility to pursue growth, innovation, and opportunity in ways that reflect their own market structures and economic needs.

Taken together, these priorities point toward a regulatory approach that is neither deregulatory nor rigid, but risk based, globally coordinated, and operationally practical. By simplifying frameworks, focusing supervision on real risks, and aligning standards across borders with flexibility in mind, policymakers can strengthen the banking system while enabling institutions to allocate capital more effectively and support long-term economic growth.

As with capital formation and digital assets, 2026 is a year for execution. The opportunity now is to ensure bank regulation evolves in a way that preserves resilience while empowering financial institutions to play their essential role in a modern, innovative global economy.

Building Scalable Markets Requires Trust

Across capital formation, digital assets, and the banking system, a common principle emerges: markets only scale sustainably when they are built on trust. That trust is not accidental—it is the product of clear rules, strong safeguards, and regulatory frameworks that evolve alongside innovation rather than react to it after the fact. As technology accelerates change and risks become more dynamic, the effectiveness of regulation matters as much as its intent.

In 2026, the task ahead is not to rethink first principles, but to apply them to design and deliver regulatory frameworks that are simpler, more proportionate, and anchored in investor trust. When regulation is clear and harmonized, companies can access capital more efficiently, financial institutions can deploy resources more productively, and innovation can scale responsibly within the guardrails that sustain market integrity.

Getting this balance right will determine whether the next generation of financial innovation strengthens public markets or fragments them; broadens access to opportunity or concentrates risk; reinforces U.S. leadership or allows it to erode. The opportunity in front of policymakers is to ensure regulation becomes not a constraint on progress, but its foundation.

Modernize the rules. Protect investors. Let innovation scale.

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