Crypto groups slam Citadel for urging tighter DeFi tokenization rules

cointelegraphPublished on 2025-12-13Last updated on 2025-12-13

Abstract

A coalition of crypto organizations, including Andreessen Horowitz and the Uniswap Foundation, has criticized Citadel Securities for urging the SEC to impose stricter regulations on DeFi platforms offering tokenized stocks. The group argues that Citadel's proposal relies on a flawed analysis of securities laws and would inappropriately extend registration requirements to decentralized entities. They contend that regulating DeFi under traditional securities frameworks is impractical and fails to recognize that autonomous software cannot act as a regulated intermediary. While sharing the goal of investor protection, the coalition believes it can be achieved through onchain markets without mandatory registration. Citadel had warned that exempting DeFi could create a dual regulatory system and deprive investors of key protections. The debate arises as the SEC seeks feedback on regulating tokenized assets.

A group of crypto organizations has pushed back on Citadel Securities’ request that the Securities and Exchange Commission tighten regulations on decentralized finance when it comes to tokenized stocks.

Andreessen Horowitz, the Uniswap Foundation, along with crypto lobby groups the DeFi Education Fund and The Digital Chamber, among others, said they wanted “to correct several factual mischaracterizations and misleading statements” in a letter to the SEC on Friday.

The group was responding to a letter from Citadel earlier this month, which urged the SEC not to give DeFi platforms “broad exemptive relief” for offering trading of tokenized US equities, arguing they could likely be defined as an “exchange” or “broker-dealer” regulated under securities laws.

“Citadel’s letter rests on a flawed analysis of the securities laws that attempts to extend SEC registration requirements to essentially any entity with even the most tangential connection to a DeFi transaction,” the group said.

The group added they shared Citadel’s aims of investor protection and market integrity, but disagreed “that achieving these goals always necessitates registration as traditional SEC intermediaries and cannot, in certain circumstances, be met through thoughtfully designed onchain markets.”

Citadel’s ask would be impractical, group says

The group argued that regulating decentralized platforms under securities laws “would be impracticable given their functions” and could capture a broad range of onchain activities that aren’t usually considered as offering exchange services.

The letter also took aim at Citadel’s characterization that autonomous software was an intermediary, arguing it can’t be a “‘middleman’ in a financial transaction because it is not a person capable of exercising independent discretion or judgment.”

Source: DeFi Education Fund

“DeFi technology is a new innovation that was designed to address market risks and resiliency in a different way than traditional financial systems do, and DeFi protects investors in ways that traditional finance cannot,” the group argued.

Related: SEC’s Crenshaw takes aim at crypto in final weeks at agency

In its letter, Citadel had argued that the SEC giving the green light to tokenized shares on DeFi “would create two separate regulatory regimes for the trading of the same security” and would undermine “the ‘technology-neutral’ approach taken by the Exchange Act.”

Citadel argued that exempting DeFi platforms from securities laws could harm investors, as the platforms wouldn’t have protections such as venue transparency, market surveillance and volatility controls, among others.

The letter initially drew considerable backlash, with Blockchain Association CEO Summer Mersinger saying Citadel’s stance was an “overbroad and unworkable approach.”

The letters come as the SEC looks for feedback on how it should approach regulating tokenized stocks, and agency chair Paul Atkins has said that the US financial system could embrace tokenization in a “couple of years.”

Tokenization has exploded in popularity this year, but NYDIG warned on Friday that assets moving onchain won’t immediately be of great benefit to the crypto market until regulations allow them to more deeply integrate with DeFi.

Magazine: SEC’s U-turn on crypto leaves key questions unanswered

Related Reads

STRC Major De-pegging's First Financial Report, How Will Strategy Repair Its Capital Flywheel?

Bitcoin treasury company Strategy released its Q2 2026 earnings report on July 31. Despite a 6.9% year-over-year revenue increase to $122 million, the company recorded a net loss of $8.22 billion, largely due to $8.32 billion in unrealized losses from Bitcoin price fluctuations. As of quarter-end, Strategy holds 843,775 BTC with an average cost of $75,000 per coin, and Bitcoin per share increased. The report highlights a critical shift in Strategy's capital model following the de-pegging of its key financing tool, STRC (Strategic Coin), which fell below its $100 target. Management's top priority is restoring STRC to its target value, aiming for a recovery by September 8. They rule out discounted STRC issuances and plan to maintain its dividend yield at 12%, instead focusing on bolstering its $3.75 billion cash reserve. Strategy has moved from a one-way "buy-and-hold" Bitcoin strategy to active capital management. This new approach, part of its "Digital Credit Capital Framework," involves flexibly managing its balance sheet across four elements: BTC, USD cash, common stock (MSTR), and digital credit securities like STRC. This allows for BTC monetization (having sold $218.4 million in BTC so far), strategic repurchases of discounted securities, and debt optimization, as seen with a $1.5 billion convertible bond buyback. The company's future hinges on two key tests: successfully re-pegging STRC to restore market confidence in its digital credit system, and a long-term recovery in Bitcoin's price to ultimately support its growth thesis.

marsbit21m ago

STRC Major De-pegging's First Financial Report, How Will Strategy Repair Its Capital Flywheel?

marsbit21m ago

STRC's First Financial Report Post-Depegging, How is Strategy Restoring the Capital Flywheel?

On July 31, 2026, Bitcoin treasury company Strategy released its Q2 financial report. Despite a 6.9% year-over-year increase in revenue to $122 million, the company recorded a substantial net loss of $8.22 billion, primarily due to $8.32 billion in unrealized losses from Bitcoin holdings. While Strategy's core Bitcoin strategy remains intact—its holdings grew 11% to 843,775 BTC—the company is undergoing a fundamental shift in its capital model. Following the de-pegging of its key financing tool, the STRCoin (STRC), from its $100 target in May, Strategy has pivoted from a one-directional "raise funds, buy Bitcoin" cycle to a more dynamic, multi-asset capital management approach. A key part of this new framework is the "Monetization Program," through which Strategy has sold approximately $218.4 million worth of BTC to bolster liquidity. The company's top priority is repairing STRC's peg, committing not to issue discounted shares until it returns to its target range. It has initiated a $1 billion buyback program for discounted digital credit securities, having repurchased $28.9 million face value of STRC so far. Management aims to restore the peg around September 8, 2026. Strategy now actively manages a matrix of assets: Bitcoin (for accumulation or strategic sales), USD cash reserves (now at $3.75 billion), common stock (MSTR), and digital credit securities like STRC. This allows for tactical moves like repurchasing discounted debt or equity to capture value. The future success of Strategy's "capital flywheel" hinges on two factors: the short-term ability to successfully re-peg STRC to restore market confidence in its digital credit system, and the long-term price trajectory of Bitcoin, upon which its entire investment thesis ultimately depends.

Odaily星球日报26m ago

STRC's First Financial Report Post-Depegging, How is Strategy Restoring the Capital Flywheel?

Odaily星球日报26m ago

With Two Consecutive Quarters of Losses, Coinbase Must Rely on Paths Beyond Trading

Coinbase posted its second consecutive quarterly net loss of $359 million on $1.22 billion in revenue for Q2, highlighting its vulnerability to crypto market cycles where weaker prices and lower volatility reduce user trading. However, the report also reveals a strategic shift in its business model. Despite a 25% quarter-over-quarter decline in global spot trading volume, Coinbase increased its market share to a company-record 10.3%. This suggests its position as a compliant U.S. on-ramp is strengthening even in a cooler market. A key development is the diversification of revenue streams. Transaction revenue fell to $599 million, nearly equaling subscription and services revenue of $555 million. Stablecoin services, generating $292 million, are becoming a crucial revenue "floor." This income, derived from interest on the $20 billion average USDC balance held on its platform, is less tied to daily trading activity. Furthermore, while spot trading volume dropped significantly, derivatives volume held steady at $1.03 trillion. Coinbase is pushing to integrate spot, stablecoin, and derivatives liquidity to create a more interconnected and sticky ecosystem for users. The GAAP net loss includes non-cash expenses like stock-based compensation and crypto asset valuation changes. Its adjusted EBITDA remained positive at $208 million for the 14th straight quarter, indicating core operations can cover ongoing costs. The company is also reducing expenses to manage the downturn. The central question moving forward is whether Coinbase's growing market share, stablecoin revenues, and expanding product integration can sufficiently offset the inherent cyclicality of its core trading business during future market contractions.

marsbit42m ago

With Two Consecutive Quarters of Losses, Coinbase Must Rely on Paths Beyond Trading

marsbit42m ago

Trading

Spot
活动图片