DeFi Organisations Challenge SEC Recommendations

A coalition of crypto organisations has criticised Citadel Securities’ request that the Securities and Exchange Commission impose stricter regulations on decentralized finance platforms dealing with tokenised stocks. The DeFi Education Fund, Andreessen Horowitz, the Uniswap Foundation and The Digital Chamber were among those signing a letter to the SEC on Friday. The group said their aim was to “correct several factual mischaracterisations and misleading statements” presented by Citadel.

Citadel Seeks SEC Oversight of Tokenised Shares
Earlier this month Citadel wrote to the SEC urging the regulator not to provide broad exemptions to DeFi platforms offering tokenised US equities. The financial firm argued that such platforms could be classified as exchanges or broker-dealers and should therefore comply with securities laws. Citadel warned that allowing tokenised shares on DeFi could create dual regulatory regimes and undermine the technology-neutral approach of the Exchange Act. The firm also raised concerns about investor protection citing the lack of venue transparency, market surveillance and volatility controls.

DeFi Groups Label Proposal Impractical
In their rebuttal, the crypto coalition described Citadel’s analysis as flawed, saying it seeks to extend SEC registration requirements to virtually any entity with even a minimal connection to a DeFi transaction. The group emphasised that while they share Citadel’s goals of investor protection and market integrity, these objectives do not always require registration as traditional SEC intermediaries. They highlighted that carefully designed on-chain markets could achieve similar safeguards.

The letter also criticised the notion that autonomous software could be considered an intermediary. “It cannot act as a middleman in a financial transaction because it is not a person capable of exercising independent discretion or judgment,” the coalition stated. They argued that DeFi technologies were created to manage market risks and enhance resiliency in ways that traditional financial systems cannot.

Industry Pushback Against Overbroad Regulation
The response from the crypto community was swift. Blockchain Association CEO Summer Mersinger described Citadel’s stance as “overbroad and unworkable.” The coalition warned that regulating decentralised platforms under securities laws would be impractical due to the nature of their functions. Such regulation could inadvertently capture a wide range of on-chain activities that are not typically considered exchange services.

Tokenisation and the Future of DeFi
The letters arrive as the SEC seeks public feedback on regulating tokenised stocks. SEC Chair Paul Atkins has indicated that the US financial system could embrace tokenisation within a few years. Tokenisation has seen a surge in popularity this year, but experts such as NYDIG caution that assets moving on-chain will not immediately benefit the crypto market unless regulatory frameworks allow deeper integration with DeFi platforms.