Key Takeaways
- •Citadel urged the SEC to apply full securities rules to DeFi systems trading tokenized equities.
- •Crypto developers and advocacy groups say the proposal misinterprets how decentralized software works.
- •Major TradFi groups, including SIFMA, back Citadel’s call for equal treatment of tokenized and traditional securities.
Instead of treating these systems as experimental technology, Citadel argued that they should be brought fully under the securities umbrella, with no broad exemptions for coders, wallet providers, or protocol developers.
The request was part of a formal response to the SEC’s ongoing evaluation of how tokenized equities should be supervised. Citadel claimed that allowing decentralized systems to operate outside traditional rules would create an uneven playing field where identical assets fall under two different regulatory rulebooks.
Crypto Industry Sees the Move as an Attempt to Protect Old Power Structures
The reaction from the digital-asset sector was swift and sharp. Many interpreted Citadel’s position as an effort to keep decentralized marketplaces from challenging entrenched financial infrastructure.
Legal experts and developers associated with the Blockchain Association pointed out the irony of one of the largest market-making firms opposing technology designed to remove rent-seeking intermediaries. Uniswap’s founder framed the letter more bluntly, calling Citadel a beneficiary of opaque market structure who would naturally oppose transparent, peer-to-peer alternatives.
Advocates emphasized that the proposal would effectively classify software engineers as regulated financial middlemen, a change they say would discourage open-source development and drive innovative teams toward jurisdictions with clearer rules.
SEC Pressure Grows as Traditional Finance Aligns
Citadel’s stance was not an isolated one. Throughout the year, several legacy finance groups have argued that tokenized stocks should not receive softer treatment simply because they move through blockchain rails. The Securities Industry and Financial Markets Association reiterated that long-standing investor protections must apply regardless of the underlying technology and noted the turbulence in crypto markets — including recent flash-crash events — as evidence for caution.
Earlier, the World Federation of Exchanges urged regulators to drop any idea of granting “innovation exemptions,” arguing that exemptions could undermine fair competition between regulated exchanges and blockchain-based products.
Tokenized Stocks at Center Stage
Tokenization advocates maintain that decentralized rails can create faster settlement, greater transparency, and lower barriers to access — but they warn that regulating every contributor in the ecosystem as a financial entity would make these promises unreachable.
Citadel, in contrast, has consistently told the SEC that tokenized assets should prove their value through technology and efficiency, not by sidestepping compliance obligations. Its latest letter reinforces that message, elevating the conflict into one of the most consequential regulatory debates as U.S. markets prepare for a wave of tokenized financial products.