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Are we seeing the end of Wall Street and the beginning of a new one?

Silicon Valley icon, investor and entrepreneur Vinod Khosla told an audience last week at the Commonwealth Club of California that technological disruption is coming to most of the top industries in the United States. And while he didn’t mention Wall Street, he could have.

“Citibank won’t solve financial inclusion, Square will if anybody does it,” he said. “Volkswagen and GM won’t solve transportation. Whether it’s Waymo or somebody else who does it, it will be a technology driven, non-institutional, ‘let’s break the rules,’ radical kind of approach. This non-institutional way of doing things, though less predictable, is much more fun and exciting.”

Now the trend is building that entrepreneurs are disrupting Wall Street – its investment banks, venture capital firms, brokerage, underwriting, exchanges and IPO listing structure. The big news yesterday out of the Securities and Exchange Commission was that offers and sales of digital assets by “virtual” organizations are subject to the requirements of the federal securities laws. The good news for firms looking to raise millions of dollars via cryptocurrency sales structures is that the SEC is open to the idea.

“The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us,” said SEC Chairman Jay Clayton in its press release. “We seek to foster innovative and beneficial ways to raise capital, while ensuring – first and foremost – that investors and our markets are protected.”

There are some warnings included in the release but the ultimate take-away is that the SEC might want to watch them, but it isn’t going to stop them. With that, we’re likely to see more new companies raise enormous amounts of capital via token sales and so-called “initial coin offerings.” Bloomberg deserves mention here for its recent coverage of the the ICO space. It’s article How to End the IPO Drought illustrated just how far these campaigns have come in raising capital, quoting investor William Mougayar, who estimated that more that $560 million have been invested in the ICE sector in June. Reuters reported that tech firms raised $1.1 billion in 89 coin sales through mid-July this year.  Another piece from Bloomberg noted that US stock markets have seen IPO numbers plunge from 300 per year 20 years ago to less than half that number.

The JLN story, earlier this month, showed how firms like Overstock.com’s subsidiary tzero, are finding ways to issue private securities on blockchain technology, all with approval from SEC.

So what’s happening here? Capital is flowing where there is less friction – lower costs and fewer middlemen between companies and investors. The institutions and mighty industries that have been built up are getting outflanked by leaner, faster, cheaper and more innovative technologies. In Reuters’ piece on the impact ICOs are having on venture capital firms Jamie Burke, founder and chief executive officer of VC firm Outlier Ventures said “The day when VCs were the elusive elite and primary source of capital for startups has ended.”

It is possible for the exchanges to react, change and innovate themselves. The London Stock Exchange Group is testing blockchain technology for private company shares with IBM. The platform is being developed by LSEG’s Borsa Italiana exchange for small and medium firms in Italy. Nasdaq has been using blockchain technology in its private market since the end of 2015 and recently teamed up with Citi’s cross-border payment facility for trading and settlement. These may be early steps toward a full blockchain-based exchange model.

Khosla is right. This market disruption will be exciting.

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Kharouf is CEO of John J. Lothian & Co. and editor-in-chief of John Lothian News (JLN). He edits the John Lothian Newsletter, MarketsWiki and MarketsReformWiki.