After a 13-page letter from investment powerhouse Citadel Securities informed the U.S. Securities and Exchange Commission that decentralized finance (DeFi) protocols that handle tokenized securities require closer regulatory scrutiny, the industry responded with its own correspondence on Friday, calling the arguments “baseless.”
“While we share Citadel’s goals regarding investor protection, orderly markets, and the integrity of the national market system, we do not agree that achieving these goals always requires registration as traditional SEC brokers and cannot, in certain circumstances, be achieved through carefully designed on-chain markets,” according to the new letter to the SEC, signed by the DeFi Education Fund, venture capital firm Andreessen Horowitz (a16z), DigitalChamber, Orca Creative, attorney JW Verret and the Uniswap Foundation.
Citadel Securities maintained that DeFi protocols can operate like exchanges or brokerages that need registration and regulation. However, this year’s new SEC leadership under President Donald Trump has been looking for ways to give the crypto industry more policy leeway. And White House crypto advisor Patrick Witt just posted on social media site X that his office supports the “need to protect software and DeFi developers.”
“As detailed in our comment letters, Citadel Securities strongly supports tokenization and other innovations that can strengthen America’s leadership in digital finance, but this does not require sacrificing the rigorous investor protections that have made US securities markets the global gold standard,” a spokesperson said in an emailed comment.
Citadel’s letter included “several factual mischaracterizations and misleading statements,” according to the DeFi coalition’s response. And a spokesperson for the DeFi Education Fund, Jennifer Rosenthal, suggested that the company is protecting its business interests.
“It is in Citadel’s interest to question the existence of a technology that threatens its business and its significant market share,” Rosenthal said.
