Key Takeaways
- The firm urged the agency to resist informal approaches to crypto market oversight and instead pursue structured rulemaking to address the growing interest in tokenizing traditional financial instruments.
- The company reiterated that innovation should not come at the cost of transparency or fairness in capital markets
Citadel Securities has advised the U.S. Securities and Exchange Commission (SEC) to avoid fast-tracking tokenized securities without a formal regulatory framework in place. In a letter addressed to the SEC’s Crypto Task Force, the firm urged the regulatory giant to resist informal approaches when it comes to crypto market oversight and instead suggested the agency to pursue structured rulemaking to address the growing interest in tokenizing traditional financial instruments.
Citadel Securities, known for its high-frequency trading and central role in U.S. equity markets, stated that tokenized securities—while technologically promising—require rigorous oversight before they can be integrated into existing financial systems.
These digital assets, which replicate the economic features of conventional securities like stocks or bonds but operate on blockchain platforms, offer advantages such as 24/7 trading and faster settlement. However, Citadel Securities argued that their introduction should not come at the expense of investor protection or market integrity.
“Technological innovation alone does not justify a bypass of established regulatory safeguards,” the firm wrote. It emphasized that tokenization should not be used to sidestep compliance obligations or seek regulatory arbitrage.
The firm warned that without careful planning, new blockchain-based platforms could operate beyond the reach of traditional compliance structures, leaving institutional investors—such as pension funds, endowments, and insurance companies—unable to participate due to regulatory constraints and fiduciary responsibilities.
Citadel Securities founder Ken Griffin, has previously criticized aspects of crypto market structure. The company reiterated that innovation should not come at the cost of transparency or fairness in capital markets. The firm expressed concern that certain digital asset platforms may seek to gain competitive advantages by operating under different standards than traditional financial firms, creating uneven market conditions.
The letter also noted that ad-hoc regulatory exemptions or staff guidance, rather than formal rulemaking, would raise questions about consistency and clarity across markets. The firm believes this could erode investor confidence and reduce participation from key institutional stakeholders.
SEC Chairman Paul Atkins has signaled a willingness to modernize securities laws to better accommodate blockchain technologies. However, Citadel’s letter suggests that such reforms must be grounded in a deliberate and inclusive process, with input from a broad range of market participants.
