DeFi Industry Alliance Responds to SEC to Counter Citadel Securities' "Strengthening DeFi Regulation" Proposal

On December 13, after hedge fund giant Citadel Securities submitted a 13-page letter to the U.S. Securities and Exchange Commission (SEC) recommending increased regulation of decentralized finance protocols handling tokenized securities, the industry responded on Friday with a joint letter, directly challenging its arguments as “completely unfounded.” This letter to the SEC, co-signed by the DeFi Education Fund, venture capital firm Andreessen Horowitz (a16z), the Digital Chamber, Orca Creative, lawyer J.W. Verret, and the Uniswap Foundation, stated: “While we agree with Citadel on the goals of investor protection, market order, and the integrity of the national market system, we oppose its view that ‘achieving these goals always requires registration of traditional SEC intermediaries and cannot be accomplished through carefully designed on-chain markets in certain cases.’” Citadel Securities maintains that DeFi protocols could operate as exchanges or broker-dealers requiring registration and regulation. However, the new SEC leadership under the Trump administration has been seeking to grant the crypto industry greater policy flexibility this year. White House crypto advisor Patrick Witte posted on social platform X that his office supports “the necessity of protecting software developers and DeFi.” “As detailed in our opinion letter, Citadel Securities strongly supports tokenization and other innovations that can strengthen the United States’ leadership in digital finance, but this should not come at the expense of strict investor protections—these protections are what make the U.S. stock market the gold standard worldwide,” a company spokesperson said in an email statement. The DeFi Alliance responded, pointing out that Citadel’s letter contained “multiple factual inaccuracies and misleading statements.” DeFi Education Fund spokesperson Jennifer Rosenthal hinted that the organization is defending its own commercial interests: “For Citadel, questioning a technology that threatens its business and significant market share is quite convenient.”