Citadel Securities and DeFi Waging War of Words Through SEC Correspondence

A behind-the-scenes battle is unfolding between one of Wall Street’s most powerful trading firms and the fast-growing DeFi sector — and it’s playing out through formal letters sent to the U.S. Securities and Exchange Commission. Citadel Securities, a dominant market-making giant, and various DeFi advocates are increasingly clashing over how crypto markets should be regulated, structured, and allowed to compete with traditional finance.

Citadel Securities has urged the SEC to approach decentralized finance with caution, warning that loosely regulated DeFi platforms could threaten market stability, investor protection, and fair price discovery. In its correspondence, the firm argues that many DeFi protocols perform market-making and trading functions without the safeguards, disclosures, and oversight required of traditional financial institutions.

On the other side, DeFi supporters are pushing back hard. Their letters accuse Wall Street firms of trying to protect entrenched monopolies under the guise of regulation. They argue that decentralized protocols offer transparency, open access, and competition that traditional market makers simply can’t match. From their perspective, heavy regulation risks suffocating innovation before it has a chance to mature.

This exchange highlights a deeper conflict: centralized financial power versus open, permissionless systems. The SEC now finds itself caught in the middle, tasked with crafting rules that protect investors without freezing technological progress. How regulators respond could shape the future balance between Wall Street and DeFi for years to come.