- A coalition of crypto organizations disputes Citadel Securities’ request for stricter SEC rules on decentralized finance (DeFi) related to tokenized stocks.
- The group challenges the view that DeFi platforms offering tokenized US equities should be regulated as traditional exchanges or broker-dealers.
- They argue that DeFi’s technology cannot be treated as an intermediary with independent judgment, and that new onchain markets can protect investors differently.
- Citadel warned that exempting DeFi could lead to dual regulatory regimes and reduce investor protections like market surveillance.
- The debate coincides with the SEC seeking public input on tokenized stock regulation amid growing tokenization interest.
A coalition including Andreessen Horowitz, the Uniswap Foundation, and crypto advocacy groups such as the DeFi Education Fund and The Digital Chamber responded on Friday to a letter by Citadel Securities urging the Securities and Exchange Commission to increase regulatory oversight of decentralized finance platforms trading tokenized U.S. equities. The crypto group contested what they called several factual inaccuracies in Citadel’s earlier filing to the SEC, opposing its call to extend traditional securities laws to DeFi.
In its December letter, Citadel argued that DeFi platforms trading tokenized stocks should not receive “broad exemptive relief,” as these platforms likely qualify as regulated “exchanges” or “broker-dealers.” They warned such exemptions could result in “two separate regulatory regimes for the trading of the same security,” potentially undermining the SEC’s “technology-neutral” regulatory approach under the Exchange Act. Concerns about diminished investor protections, including the absence of venue transparency, market surveillance, and volatility controls, were also highlighted.
The responding coalition rejected the extension of SEC registration requirements to DeFi entities with even marginal involvement in transactions. They emphasized that decentralized autonomous software cannot be classified as an intermediary since it lacks independent discretion or judgment. According to their letter, “DeFi technology is a new innovation that was designed to address market risks and resiliency in a different way than traditional financial systems do, and DeFi protects investors in ways that traditional finance cannot.”
They further described applying securities laws to decentralized platforms as impractical because it could inadvertently regulate a wide array of onchain activities typically not regarded as exchange services. While agreeing with Citadel on the goals of investor protection and market integrity, the coalition argued these aims do not always require intermediaries to register under traditional SEC frameworks and can sometimes be met by well-designed blockchain-based markets.
The broader dialogue unfolds as the SEC solicits feedback on regulating tokenized stocks, with agency chair Paul Atkins predicting the U.S. financial system may adopt tokenization within a few years. Meanwhile, industry voices caution that until regulatory frameworks evolve, onchain asset transfers may not fully benefit the crypto market’s integration with DeFi.
For more information on Citadel’s position, see their letter to the SEC. Further discussion by the DeFi Education Fund is available on their social media.
✅ Follow BITNEWSBOT on Telegram, Facebook, LinkedIn, X.com, and Google News for instant updates.
Previous Articles:
- Tether’s $1.1B Juventus Buyout Bid Rejected by Exor
- China Rejects Nvidia H200 Chips, Cites Push for Semiconductor Independence
- Tokenized Stocks May Boost Crypto as Blockchain Integration Grows
- Agnelli Family Resists Tether’s Bid for Juventus Football Club
- Aave DAO Fees Diverted Amid Controversy Over CoW Swap Integration
