Citadel Securities engages in a debate with the DeFi sector over regulatory issues in communications with the SEC

Investment giant Citadel Securities submitted a 13-page letter to the SEC, suggesting that stricter regulations should be imposed on decentralized finance (DeFi) protocols handling tokenized securities. The DeFi industry responded last Friday with its own letter, stating that Citadel Securities' arguments are "baseless."

In a new letter to the SEC co-signed by DeFi Education Fund, Andreessen Horowitz (a16z), DigitalChamber, Orca Creative, attorney J.W. Verret, and Uniswap Foundation, it stated: "While we share Citadel Securities' goals regarding investor protection, market order, and the integrity of the national market system, we disagree that achieving these goals always requires registration like traditional SEC intermediaries, nor do we agree that in some cases these requirements cannot be met through well-designed on-chain markets."

Citadel Securities believes that DeFi protocols may operate as exchanges or brokers that require registration and regulation. However, under the leadership of President Donald Trump, the SEC's new management has been seeking to provide more policy flexibility for the crypto industry. White House crypto advisor Patrick Witt also posted on social media platform X, stating that his office supports "the necessity of protecting software developers and DeFi."

A spokesperson for Citadel Securities commented in an email: "As we detailed in our comment letter, Citadel Securities firmly supports tokenization and other innovations that can solidify the U.S. leadership in digital finance, but that does not mean sacrificing strict investor protection measures, which are what make the U.S. stock market the global gold standard."

The DeFi Alliance's response stated that Citadel Securities' letter contains "multiple factual inaccuracies and misleading statements." DeFi Education Fund spokesperson Jennifer Rosenthal stated that the company is protecting its business interests. Rosenthal said, "Citadel Securities questioning the existence of a technology that threatens its business and significant market share is very much in its interest."