After investment giant Citadel Securities recommended in a 13-page letter to the U.S. Securities and Exchange Commission that decentralized finance (DeFi) protocols that handle tokenized securities require stricter regulation, the industry fired back with its own letter on Friday, calling the argument “baseless.”
According to a new letter to the SEC signed by the DeFi Education Fund, venture capital firm Andreessen Horowitz (a16z), and Orca’s Digital Chamber, “While we agree with Citadel’s goals for investor protection, orderly markets, and the integrity of the domestic market system, we disagree that achieving these goals always requires registration as a traditional SEC intermediary and cannot in certain circumstances be met by a thoughtfully designed on-chain market.” Creative, Attorney JW Verret, Uniswap Foundation.
Citadel Securities argued that DeFi protocols could function as exchanges or intermediaries that require registration and regulation. But the SEC’s new leadership this year under President Donald Trump has been looking for ways to give the crypto industry more policy freedom. And White House cryptocurrency adviser Patrick Witt just posted on social media site X that his office supports “the need to protect software developers and DeFi.”
“As detailed in our comment letter, Citadel Securities strongly supports tokenization and other innovations that can strengthen U.S. leadership in digital finance, but this does not have to come at the expense of the stringent investor protections that have made the U.S. stock market the world’s gold standard,” a spokesperson said in an emailed comment.
The DeFi Coalition’s response said Citadel’s letter contained “several factual errors and misleading statements.” Jennifer Rosenthal, a spokeswoman for the DeFi Education Fund, also suggested that the company is protecting its business interests.
“It’s convenient for Citadel to question the existence of a technology that threatens its business and significant market share,” Rosenthal said.
