After a 13-page letter from investment powerhouse Citadel Securities informed the US Securities and Exchange Commission that decentralized finance (DeFi) protocols that handle tokenized securities require a closer regulatory grip, the industry hit back with its own correspondence on Friday, calling the arguments “baseless.”
“While we share Citadel’s goals of investor protection, orderly markets, and the integrity of the national market system, we disagree that achieving these goals always requires registration as traditional SEC intermediaries and, in certain circumstances, cannot be met through thoughtful onchain markets,” according to the new letter to the SEC, signed by the Horwitzo Education Fund, Andrezessen, DigitalChamber, Orca Creative, attorney JW Verret and the Uniswap Foundation.
Citadel Securities argued that DeFi protocols can act as exchanges or brokers with the need for registration and regulation. However, this year’s new leadership of the SEC under President Donald Trump has sought ways to give the crypto industry more political leeway. And White House crypto advisor Patrick Witt just wrote on social media X that his office supports “the need to protect software developers and DeFi.”
“As described in our comment letters, Citadel Securities strongly supports tokenization and other innovations that can reinforce US leadership in digital finance, but this does not require sacrificing the rigorous investor protections that have made US equity markets the global gold standard,” a spokesperson said in an emailed comment.
Citadel’s letter contained “several factual mischaracterizations and misleading statements,” according to the DeFi Coalition’s response. And a spokeswoman for the DeFi Education Fund, Jennifer Rosenthal, suggested the firm is protecting its business interests.
“It is convenient for Citadel to question the existence of a technology that threatens its business and significant market share,” Rosenthal said.
