Citadel Securities and DeFi Clash Over Regulation

Citadel Securities has intensified its call for tighter regulations on decentralized finance, or DeFi, urging the U.S. Securities and Exchange Commission to impose stricter rules on protocols handling tokenized securities.

This follows a 13-page letter from Citadel that argued these DeFi platforms could function as exchanges or broker-dealers, necessitating registration under securities laws. In response, a coalition of crypto organizations, including the DeFi Education Fund and Andreessen Horowitz, contested Citadel's claims, describing them as 'baseless' and highlighting mischaracterizations within their arguments.

The coalition acknowledges shared goals of investor protection and market integrity but states that these can be achieved without conforming to traditional SEC registration requirements. They assert that the regulation of DeFi platforms under current securities laws is impractical and could hinder the innovative potential of decentralized technologies.

Furthermore, they emphasize that autonomous software cannot act as intermediaries in transactions, as it lacks the ability to exercise independent judgment. As the SEC seeks feedback on regulating tokenized stocks, the ongoing clash between Citadel and DeFi advocates represents a significant moment in the evolving landscape of cryptocurrency regulation.