DeFi Industry Alliance Writes Letter to SEC Refuting Citadel Securities' "Enhanced DeFi Regulation" Proposal

On December 13, hedge fund giant Citadel Securities submitted a 13-page letter to the U.S. Securities and Exchange Commission (SEC) calling for strengthened regulation of decentralized finance (DeFi) protocols handling tokenized securities. In response, the crypto industry issued a joint letter on Friday dismissing Citadel’s argument as “baseless.” The letter—co-signed by the DeFi Education Fund, venture capital firm Andreessen Horowitz (a16z), the Chamber of Digital Commerce, Orca Creative, attorney J.W. Verret, and the Uniswap Foundation—addressed the SEC directly, stating: “While we share Citadel’s goals of investor protection, market order, and national market system integrity, we reject its claim that ‘achieving these goals always requires traditional SEC intermediary registration and cannot be accomplished in some cases through thoughtfully designed on-chain markets.’” Citadel Securities argued DeFi protocols could function as exchanges or brokers requiring SEC registration and regulation. Notably, the SEC’s leadership under the Trump administration has sought to carve out more policy space for the crypto industry. White House crypto advisor Patrick Viter recently posted on X (formerly Twitter) that his office supports “the need to protect software developers and DeFi.” In an email statement, a Citadel spokesperson noted: “As outlined in our opinion letter, Citadel Securities strongly backs tokenization and other innovations that can cement America’s leadership in digital finance—but this must not come at the cost of sacrificing robust investor protection. These safeguards are what make the U.S. stock market the global gold standard.” In its pushback, the DeFi Alliance flagged Citadel’s letter as containing “multiple factual inaccuracies and misleading statements.” Jennifer Rosenthal, a spokesperson for the DeFi Education Fund, suggested Citadel is defending its own business interests: “For Citadel, questioning a technology that threatens its business and significant market share is rather convenient.”