Crypto Giants Clash with Citadel as SEC’s DeFi Rules Ignite Industry Showdown
Wall Street's old guard just picked a fight with the wrong generation.
The SEC's new DeFi regulations dropped last week—and Citadel Securities immediately lined up behind them. Ken Griffin's trading behemoth filed comments supporting tighter oversight of decentralized finance protocols. Called it 'necessary investor protection.'
Crypto's counterpunch landed within hours.
Coinbase fired back with a 12-page rebuttal. Argued the rules would 'stifle innovation' and misapply securities law to decentralized systems. Andreessen Horowitz piled on—their filing warned the proposal 'threatens the entire Web3 ecosystem.' Even the DeFi Education Alliance mobilized, calling the SEC's approach 'technologically illiterate.'
This isn't just paperwork—it's a power struggle.
Citadel wants clearer rules for crypto trading venues. Thinks they should register like traditional exchanges. The crypto giants see that as existential—you can't register something that has no CEO, no headquarters, and runs on code.
The subtext? Billions in market structure.
DeFi protocols now handle over $100 billion in assets. They're eating into traditional finance's turf—lending, trading, derivatives. Citadel's support for stricter rules looks a lot like established players building regulatory moats. Classic finance move: when competition heats up, send in the lawyers.
What happens next?
The SEC digests comments until February. Then either revises the rules or charges ahead. Either way, the lines are drawn. Crypto's biggest names just showed they'll fight regulation that treats code like a corporation. And Wall Street? Still trying to regulate its disruptors into submission—a strategy that's worked so well against technology before.
The irony? Citadel spends millions lobbying for favorable rules while calling DeFi's lack of oversight dangerous. Guess decentralization is only a problem when you're not the one collecting the spread.
A group of major crypto and DeFi organizations has pushed back strongly against Citadel Securities after the firm urged the US SEC to tighten oversight on decentralized finance, especially around tokenized securities. The response came in the form of a joint letter sent to the SEC by the DeFi Education Fund, Andreessen Horowitz, The Digital Chamber, the Uniswap Foundation, and others. They argue that Citadel’s view misunderstands how DeFi actually works and could lead to rules that are difficult to apply in practice.
What Sparked the Dispute
The disagreement started after Citadel asked the SEC to clearly identify and regulate all intermediaries involved in trading tokenized US equities. Citadel claimed that many DeFi protocols act like traditional exchanges or brokers and should follow the same registration rules. According to Citadel, failing to do so could weaken investor protections and create unfair differences between traditional finance firms and on-chain platforms.
Why Crypto Groups Disagree
Crypto advocates say Citadel’s argument stretches existing securities laws too far. In their letter, they said that labeling software tools or blockchain infrastructure as intermediaries is misleading. They stressed that most DeFi platforms do not control user funds and do not act as middlemen. Instead, users keep control of their own assets, and transactions happen directly on-chain. Because of this, applying traditional registration rules could end up targeting developers and builders who never touch customer money.
SEC Tries to Balance Rules and Innovation
Moreover, the debate comes as the SEC continues to talk about supporting innovation while enforcing existing laws. SEC Chair Paul Atkins has said the agency wants to help new technologies fit within current rules rather than block progress. Tokenization, which puts assets like stocks and bonds on blockchains, has gained attention as a way to modernize markets, but it also raises new regulatory questions that are still being worked through.
Community Disagree
Crypto analyst Walter Peppenberg argues that Citadel’s recent push for stricter SEC rules on DeFi is not about protecting investors but about protecting its own business. He says Citadel, which makes billions from traditional market-making, feels threatened by DeFi because it removes middlemen and lets users trade directly. According to him, the DeFi coalition rightly pushed back, calling Citadel’s claims misleading. Analyst adds that the timing looks desperate, especially as the current U.S. political and regulatory climate is becoming more open to crypto and DeFi developers, exposing how nervous legacy finance is about losing control.
Citadel Responds and Stands Firm
However, Citadel has pushed back on the criticism, saying it supports tokenization and digital finance but does not want investor protections weakened. Company representatives said that innovation does not require lowering standards that have long supported US markets. They also warned that giving broad exemptions to DeFi could harm investors if risks are not properly addressed.
