Citadel Urges SEC to Tighten DeFi Rules for Tokenized Stocks

Source: CryptoTale Original Title: Citadel Urges SEC to Tighten DeFi Rules for Tokenized Stocks Original Link: https://cryptotale.org/citadel-urges-sec-to-tighten-defi-rules-for-tokenized-stocks/

Citadel’s Push Against DeFi Exemptions

A new dispute has surfaced in Washington over tokenized U.S. equities and decentralized finance. Citadel warned against broad regulatory exemptions for DeFi activity tied to equities in a letter sent to the SEC on Tuesday. The firm told the SEC that developers and service providers should not receive wide exemptive relief, specifically identifying DeFi developers, smart-contract coders, and self-custody wallet providers as roles that could support trading in tokenized shares but should not be placed outside securities regulation.

The Two Rulebooks Concern

Citadel argued that DeFi trading venues may fit the legal definition of an exchange or qualify as a broker-dealer, depending on whether the platform enables trading of tokenized U.S. equities. The firm urged the SEC to apply securities-law standards in such cases.

The letter argued that exemptions would create unequal treatment for the same security. Citadel said a tokenized share and a regular share represent the same underlying equity. It warned that allowing DeFi trading with broad relief could lead to two different rule sets, conflicting with a technology-neutral approach under the Exchange Act.

Industry Backlash

Crypto lawyers and industry figures criticized the proposal soon after it became public. Jake Chervinsky, a lawyer and Blockchain Association board member, mocked the idea that Citadel would support tools that remove intermediaries, noting the industry expected this opposition.

Uniswap founder Hayden Adams attacked the recommendation, saying Citadel CEO Ken Griffin was “coming for DeFi” through lobbying efforts. Adams criticized Citadel’s argument on fair access standards, arguing that open-source and peer-to-peer systems lower barriers to liquidity creation.

The Blockchain Association issued a separate response through its chief executive, Summer Mersinger. She argued that regulating software developers like intermediaries would harm U.S. competitiveness and push innovation offshore without improving investor protection. Mersinger urged the SEC to focus on “actual intermediaries” that stand between users and their assets, rejecting the approach outlined in Citadel’s letter.

Industry Group Positions

SIFMA, a major securities industry trade group, released a statement supporting innovation in tokenized securities while insisting these products must follow core investor protections used in traditional markets. SIFMA pointed to recent crypto market disruptions as a reminder of why those frameworks exist and opposed broad SEC exemptive relief for blockchain and DeFi platforms.

In November, the World Federation of Exchanges also asked the SEC to abandon plans for an “innovation exemption” to crypto firms offering tokenized stocks. Citadel’s new letter adds to the mounting pressure as the SEC reviews feedback on how to regulate tokenized equities.