Citadel Urges SEC to Regulate Open-Source Developers as Stockbrokers Amid Tokenized Equity Debate

Citadel Securities has escalated its push for regulatory clarity on decentralized finance, filing a 13-page letter with the SEC arguing that protocols facilitating tokenized equity trading should be classified as exchanges or broker-dealers. The MOVE comes as tokenized equities transition from theoretical concept to market reality, with Citadel insisting existing market safeguards must apply.

The SEC's Investor Advisory Committee convened a panel days later, revealing a fundamental divide: while technical feasibility of on-chain equities is no longer in question, regulators now grapple with how to preserve DeFi's permissionless nature while enforcing investor protections. This regulatory standoff represents crypto's most significant policy battle since the Howey test debates.

Citadel's filing warns against creating a shadow equity market through DeFi exemptions, advocating instead for application of traditional market rules - including transparent fees, consolidated reporting, and mandatory registration. The firm maintains this framework is essential for maintaining market integrity as tokenization gains traction.