Citadel Securities encouraged the U.S. Securities and Exchange Commission (SEC) to adopt a careful stance towards decentralized finance (DeFi), asserting that certain systems engaging in tokenized U.S. equities could mimic regulated market structures and ought to be assessed accordingly.
The crypto community reacted strongly on social media after the public release of the Dec. 2 letter, part of a consultation regarding how federal securities regulations should apply to crypto trading platforms.
Historically, the SEC has been perceived as skeptical about the crypto industry under former Chair Gary Gensler, but has shown a more accommodating approach since President Donald Trump’s return to office. Gensler’s leadership argued that most digital assets fell under the current securities framework, fostering a more adversarial regulatory environment, especially toward DeFi.
In its correspondence, Citadel highlighted that numerous automated protocols connect buyers and sellers in ways that are similar to traditional exchanges, even if their operations depend on smart contracts instead of centralized entities.
Citadel claimed that these systems, which can execute trades based on predefined rules, may fulfill definitions regarding exchanges or broker-dealers, especially when they enable transactions in securities-related products.
Furthermore, Citadel stressed that any regulatory leniency should be pursued only after thoroughly evaluating investor protection concerns, cautioning that inconsistent oversight between tokenized and conventional markets could create transparency and compliance issues.
The crypto community was vocal on social media. Uniswap founder Hayden Adams criticized the letter, arguing that it effectively aimed to classify open-source developers as if they were centralized intermediaries.
He also contested Citadel’s assertion that DeFi fails to ensure “fair access,” asserting that permissionless protocols actually promote, not hinder, participation.
Crypto policy analyst “BlockProf” remarked: “Citadel has declared war on project crypto, echoing arguments from Gensler’s unsuccessful effort to regulate DeFi and challenging points made by Commissioner [Hester] Pierce in her dissent. Expect extensive opposition letters; stay tuned.”
