Key Insights
- Citadel Securities urged the SEC to regulate tokenization with respect to DeFi tokenized stock platforms as traditional exchanges or broker-dealers, opposing any exemptive relief.
- Industry groups like SIFMA echoed Citadel’s stance, insisting tokenized securities must follow existing investor-protection frameworks.
- The broader debate highlights rising tension between Wall Street firms aiming to control tokenization rules and DeFi advocates pushing for open, innovation-friendly regulation.
Tokenization of stocks has become a flashpoint in a new conflict between Wall Street and crypto advocates.
On 2 December 2025, Citadel Securities, the leading U.S. market maker, urged the SEC to crack down on DeFi trading of tokenized shares.
In the letter, Citadel said it “welcome[s] tokenization” as an innovation but warned that decentralized trading platforms must still meet existing rules.
The firm argued that if tokenized stocks on DeFi protocols were exempt from normal exchange and broker-dealer laws, the same asset could end up under “two separate regulatory regimes”, contrary to the SEC’s technology-neutral mandate.
The letter to the SEC’s Crypto Task Force recommended that regulators explicitly identify all intermediaries in tokenized trading, refuse broad exemptions, and proceed via traditional rulemaking to update clearing-and-settlement rules.
Citadel’s SEC Letter on Tokenization and DeFi
Citadel’s letter framed tokenization as “another innovation” that can improve market efficiency, but stressed it must be built on the “bedrock principles” of investor protection.
Specifically, the firm said DeFi platforms that “bring together buyers and sellers” of tokenized U.S. equities should meet the definition of an exchange, and any firms running smart contracts or wallets that facilitate trades may qualify as broker-dealers.
In Citadel’s view, allowing DeFi protocols to operate without registration would strip away decades of safeguards.
The letter bluntly advised the SEC to treat blockchain venues like any other trading venue and to avoid “self-serving regulatory arbitrage.”
In short, Citadel urged the agency to let tokenization succeed only “on the merits” under normal securities laws[1], rather than by sidestepping rules.
The letter touched off an immediate backlash from the crypto industry . Many in DeFi saw Citadel’s demands as a thinly veiled attempt to protect traditional market makers.
Blockchain Association policy counsel Jake Chervinsky posted on Dec. 3, 2025,
Uniswap founder Hayden Adams was even more scathing. He accused Citadel’s CEO Ken Griffin of opposing open-source finance, quipping that
On Dec. 3, Blockchain Association CEO Summer Mersinger issued an official statement saying Citadel’s view,
Mersinger warned that treating code-writers as brokers,
Tokenization vs. Tradition: A New Battle
Big finance is actually bullish on tokenization in principle, but Citadel’s letter shows the fault lines.
For instance, BlackRock’s CEO Larry Fink and COO Rob Goldstein recently hailed tokenization as “the next major evolution in market infrastructure.”
He stated that blockchain records will allow “stocks, bonds, real estate, and other holdings” to be traded without traditional intermediaries.
In BlackRock’s view, tokenized ledgers could expand investable assets and enable instant settlement across 24/7 networks.
But Citadel’s stance is that introducing parallel token markets demands the same guardrails as today’s markets. Traditional finance groups have since lined up behind that view.
The Securities Industry and Financial Markets Association (SIFMA) issued its own comment in early December supporting tokenization in theory but insisting that
Likewise, the World Federation of Exchanges (representing major stock exchanges) warned the SEC in November 2025 against granting a special “innovation exemption” to firms offering tokenized stocks.
In short, Wall Street is uniting in support of a level playing field: innovations like tokenization are welcome, but not if they sidestep existing oversight.
The clash over Citadel’s letter suggests that tokenization, once seen as a way to revolutionize finance, may first trigger a protracted regulatory showdown between crypto libertarians and established market makers.
Source: https://www.thecoinrepublic.com/2025/12/05/why-citadels-anti-defi-push-signals-a-new-wall-street-tokenization-battle/
