- Citadel Securities urged the SEC to control particular DeFi methods (buying and selling tokenised US equities) as conventional exchanges or broker-dealers.
- The agency warned {that a} lighter-touch regime may create gaps in compliance and transparency for traders.
- The stance drew backlash from crypto advocates who rejected treating open-source protocol builders like centralised intermediaries.
Citadel Securities has urged US regulators to deal with some decentralised finance (DeFi) methods extra like conventional market infrastructure, prompting a backlash from crypto advocates.
In a Dec. 2 letter to the US Securities and Exchange Commission (SEC), filed as a part of its session on how securities legal guidelines ought to apply to crypto buying and selling platforms, Citadel stated sure DeFi protocols dealing in tokenised US equities look functionally much like exchanges or broker-dealers.
The agency argued that, even when trades are carried out by way of sensible contracts as an alternative of a central operator, the methods nonetheless match consumers and sellers beneath preset guidelines in methods regulators already oversee in conventional markets.
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Citadel Warns SEC of Potential Transparency and Compliance Gaps
Citadel instructed the SEC that any lighter-touch regime for DeFi ought to solely be thought-about after intently inspecting investor-protection dangers. It warned that making use of totally different requirements to tokenised and traditional markets may create gaps in transparency and compliance.
The response angered many within the crypto sector as soon as the letter grew to become public.
The Securities and Monetary Markets Affiliation (SIFMA) made an identical warning this week:
The SEC ought to train nice warning to make sure that innovation strengthens somewhat than weakens the regulatory structure that tens of tens of millions of American households depend on to save lots of and make investments, and that issuers depend on to boost capital. That requires them to judge whether or not exempting members in tokenized securities markets from securities regulation registration and different necessities is in step with defending traders, serving the general public curiosity, and sustaining truthful competitors throughout each tokenized and conventional markets.
Uniswap founder Hayden Adams stated Citadel’s place successfully treats open-source protocol builders as in the event that they had been centralized intermediaries. He additionally rejected Citadel’s suggestion that DeFi can’t guarantee “truthful entry,” arguing that permissionless methods broaden participation somewhat than restrict it.
Crypto coverage commentator “BlockProf” stated Citadel was echoing arguments beforehand made by SEC Chair Gary Gensler in his push to convey DeFi beneath current guidelines, and attacking factors raised by SEC Commissioner Hester Peirce in her dissent.
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