Citadel Securities, the buying and selling large based by billionaire Ken Griffin, is looking on the US SEC to carry tokenized equities to the identical requirements as conventional listed shares.
In a current letter submitted to the SEC’s Crypto Activity Power on July 21, the agency warned towards granting broad exemptions for digital property that resemble fairness securities.
The corporate stated it helps innovation in market infrastructure, however drew a pointy line between true technological progress and regulatory arbitrage.
“Tokenized securities should obtain success by delivering actual innovation and effectivity to market individuals, slightly than by means of self-serving regulatory arbitrage,” Citadel wrote.
Citadel Securities wrote a compelling letter to the @SECGov on the subject of tokenized public shares, with which I strongly agree:
"Merely put, whereas we strongly assist technological improvements designed to handle market inefficiencies, searching for to take advantage of regulatory arbitrage…— Carlos Domingo (@carlosdomingo) July 22, 2025
‘Look-a-Like’ Equities Should Observe Similar Guidelines, Citadel Tells SEC
Tokenized equities, issued on blockchains as options to listed securities, have gained momentum. This rise comes as crypto corporations push for extra versatile regulatory therapy. Nevertheless, Citadel argued that these “look-a-like” merchandise nonetheless meet the definition of securities.
Subsequently, it stated, they have to adjust to the identical guidelines that govern the nationwide market system.
Citadel cautioned the SEC towards exempting these merchandise from core investor protections. These embrace finest execution requirements, commerce transparency, and honest entry provisions. As an alternative, the agency known as for a clear and deliberative rulemaking course of.
It added that this course of ought to contain all market individuals, together with exchanges, issuers, institutional traders and retail traders.
Creating Shadow Markets Dangers Fragmenting Liquidity, Citadel Says
The agency additionally rejected the thought of permitting these choices to function in a regulatory “sandbox.” It argued that many proposals come from massive, well-funded entities. In line with the agency, these gamers are trying to bypass essential safeguards.
Subsequently, it said: “The Fee mustn’t enable token purveyors to revenue just by avoiding the Fee’s time-tested framework.”
Additional, Citadel stated the dangers transcend particular person traders. It warned that creating parallel markets for tokenized equities may destabilize the broader equities market.
Particularly, it pointed to potential points like liquidity fragmentation, counterparty danger and confusion over voting rights and tax therapy.
The letter raised considerations about potential disruptions to the ETF market and IPO pipeline. Citadel additionally questioned whether or not tokenized equities may scale back transparency in shareholder bases or dampen shareholder engagement, significantly when voting rights are both absent or indifferent from possession incentives.
Agency Warns Towards Cross-Border Crypto Loopholes
The agency listed a number of key disclosures it believes ought to be obligatory earlier than any regulatory aid is granted. These embrace who’s issuing the token, what rights are hooked up and the way costs are aligned with the underlying equities. Moreover, it urged the SEC to work with the CFTC and international regulators to stop cross-border loopholes.
As of June, Citadel Securities was contemplating getting into the crypto buying and selling house. President Jim Esposito has publicly said that crypto has handed “the purpose of no return.” He added that it’s now an asset class being taken critically by institutional traders.
The letter indicators that whereas Citadel is open to participating with crypto markets, it expects regulatory requirements to be upheld.
Any regulatory changes for blockchain-based property, the agency insisted, should be utilized throughout the market, not carved out for a subset of gamers searching for lighter oversight.
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