Citadel Securities is urging the U.S. Securities and Exchange Commission (SEC) to take a cautious approach to decentralized finance (DeFI), arguing that some systems for handling tokenized U.S. stocks may resemble regulated market infrastructure and should be evaluated accordingly.
The cryptocurrency industry expressed outrage on social media after the letter, submitted as part of a consultation on how federal securities laws should apply to cryptocurrency trading platforms, was made public on December 2.
The SEC, widely seen as skeptical of the cryptocurrency industry under former Chairman Gary Gensler, has taken a more conciliatory approach since President Donald Trump returned to the White House. Under Gensler, the agency has argued that most digital assets are subject to existing securities laws. His tenure set the tone for a more confrontational regulatory landscape, particularly for the DeFi space.
Citadel said in the letter that many automated protocols bring buyers and sellers together in a similar way to traditional exchanges, even if the mechanism relies on smart contracts rather than centralized operators.
Because these systems can execute trades using preset rules, Citadel believes they may meet the definition associated with an exchange or broker-dealer, particularly if they facilitate trading in securities-related products.
Citadel also said any regulatory relief would only be implemented after a clear review of the investor protection implications, warning that inconsistent regulation between tokenized and traditional markets could lead to gaps in transparency and compliance.
The cryptocurrency community is exploding on social media. Uniswap founder Hayden Adams criticized the submission, saying it was effectively trying to treat open source developers as centralized intermediaries.
He also refuted Citadel’s assertion that DeFi cannot guarantee “fair access,” arguing that permissionless protocols expand rather than limit participation.
Cryptocurrency policy expert “BlockProf” added: “Citadel just declared war on cryptocurrency projects, accepting arguments made by Gensler in his failed attempt to regulate DeFi and attacking the points made by the commissioner [Hester] Pierce objected. Letters of objection will be widespread, so stay tuned. “