Citadel Securities urged the US Securities and Exchange Commission (SEC) to take a cautious approach towards decentralized finance (DeFI), arguing that certain systems that trade tokenized US stocks may resemble regulated market infrastructure and should be evaluated accordingly.
The cryptocurrency industry took to social media to express its outrage after the December 2 letter, submitted as part of a consultation on how federal securities laws should apply to cryptocurrency trading platforms, was made public.
The SEC, widely seen as skeptical of the crypto sector under former Chairman Gary Gensler, has taken a more conciliatory approach since President Donald Trump’s return to the White House. Under Gensler, the agency argued that most digital assets were subject to existing securities laws. His tenure set the tone for a more contentious regulatory landscape, particularly towards DeFi.
In its letter, Citadel said that many automated protocols bring buyers and sellers together in ways comparable to traditional exchanges, even if the mechanisms are based on smart contracts rather than centralized operators.
Because these systems can execute trades using pre-established rules, Citadel argued that they can satisfy definitions linked to exchanges or broker-dealers, particularly when facilitating transactions in security-linked products.
Citadel also said that any regulatory relief should come only after a clear examination of the implications for investor protection, warning that inconsistent oversight between tokenized and traditional markets could lead to gaps in transparency and compliance.
The crypto community erupted on social media. Uniswap creator Hayden Adams criticized the presentation, saying it effectively sought to treat open source developers as if they were centralized intermediaries.
He also rejected Citadel’s claim that DeFi cannot guarantee “fair access,” arguing that permissionless protocols expand, rather than restrict, participation.
Crypto policy expert “BlockProf” added: “Citadel has just declared war on the crypto project, taking up the arguments presented by Gensler in his failed attempt to regulate DeFi and attacking the points made by Commissioner [Hester] Pierce in his disagreement. The letters from the opposition will be extensive, stay tuned.”
