After a 13-page letter from investment powerhouse Citadel Securities informed the U.S. Securities and Exchange Commission that decentralized finance (DeFi) protocols dealing with tokenized securities required a tighter regulatory grip, the industry answered with his own correspondence Friday, calling the arguments “baseless.”
“While we share Citadel’s goals with respect to investor protection, orderly markets, and the integrity of the domestic market system, we disagree that achieving these goals still requires registration as a traditional SEC intermediary and cannot, in certain circumstances, be achieved through carefully designed on-chain markets,” according to the new letter to the SEC, signed by DeFi Education Fund, venture capital firm Andreessen Horowitz (a16z), the DigitalChamber, Orca Creative, lawyer JW Verret and the Uniswap Foundation.
Citadel Titles argued that DeFi protocols can function as exchanges or brokerages requiring registration and regulation. However, this year, the SEC’s new leadership, under President Donald Trump, has sought ways to give the crypto industry more policy leeway. And Patrick Witt, White House crypto advisor, just published on the social networking site that his office supports the “need to protect software and DeFi developers.”
“As detailed in our comment letters, Citadel Securities strongly supports tokenization and other innovations that can strengthen U.S. leadership in digital finance, but this does not require sacrificing the rigorous investor protections that have made U.S. securities markets the global gold standard,” a spokesperson said in an emailed comment.
Citadel’s letter included “several factual misinterpretations and misleading statements,” according to the DeFi coalition’s response. And a spokeswoman for the DeFi Education Fund, Jennifer Rosenthal, suggested the company was protecting its business interests.
“It is timely for Citadel to question the existence of a technology that threatens its business and significant market share,” Rosenthal said.
