Market maker Citadel Securities recommended that the SEC impose stricter rules on decentralized finance platforms offering tokenized stocks. The firm submitted a letter to the SEC on Tuesday, arguing that DeFi developers, smart-contract coders, and self-custody wallet providers should not receive “broad exemptive relief” for facilitating trading of tokenized US equities. Citadel claimed that these platforms likely fall under the definitions of an “exchange” or “broker-dealer” and must comply with securities laws if offering tokenized stocks. Regulatory Concerns and Crypto Backlash The firm warned: “Granting broad exemptive relief to facilitate the trading of a tokenized share via DeFi protocols would create two separate regulatory regimes for the trading of the same security.” “It would be the exact opposite of the ‘technology-neutral’ approach taken by the Exchange Act.” The letter was submitted as part of the SEC’s request for feedback on tokenized stock regulation. It quickly drew strong reactions from the crypto community. Lawyer and Blockchain Association board member Jake Chervinsky remarked on Thursday: “Whoever thought Citadel would be against innovation that removes predatory, rent-seeking intermediaries from the financial system?” He added: “Oh, right, literally every single person in crypto.” Industry Voices Warn Against Overreach Uniswap founder Hayden Adams said: “It makes sense the king of shady TradFi market makers doesn’t like open source, peer-to-peer tech that can lower the barrier to liquidity creation.” Summer Mersinger, CEO of the Blockchain Association, criticized the approach, stating: “Regulating software developers as if they were financial intermediaries would undermine US competitiveness, drive innovation offshore, and do nothing to advance investor protection.” She urged the SEC to focus on actual intermediaries who stand between users and their assets. SIFMA’s Position The Securities Industry and Financial Markets Association echoed concerns over DeFi carve-outs. While supporting innovation, SIFMA stressed that tokenized securities must adhere to the same investor protections applied to traditional finance. Citadel had previously told the SEC’s Crypto Task Force in July that tokenized securities must provide “real innovation and efficiency to market participants, rather than through self-serving regulatory arbitrage.”
