Citadel Securities has issued a formal warning to the U.S. Securities and Exchange Commission (SEC), urging the agency to immediately slow down the rollout of tokenized equities. In a letter sent to the SEC’s crypto task force, the trading giant argues that the rapid expansion of these blockchain-based securities could confuse investors, distort market fairness, and undermine the traditional IPO system.

🧩 Tokenization Without Clear Rules? A Recipe for Confusion

Citadel warns that tokenized securities—digital representations of stocks or assets traded on blockchain networks—are being introduced too quickly and without sufficient regulatory oversight. The firm believes this opens the door to regulatory loopholes that could benefit certain platforms like Coinbase or Robinhood while leaving traditional players at a disadvantage.

The letter emphasizes that such a shift could weaken the fragile IPO market. By offering private firms a backdoor route to capital without going public, tokenization could further drain activity from the public equities space.

⚠️ Risk for Pension Funds and Banks

Another concern raised is that pension funds, banks, and other major financial institutions may not be allowed to hold crypto assets due to internal policies or fiduciary restrictions. A mass shift toward tokenized securities could exclude these institutions from the market entirely.

"True innovation means offering better tools—not shortcutting the rules," the firm stated, emphasizing that tokenized products must succeed based on genuine merit, not through regulatory arbitrage.

💼 SEC Quiet So Far, But Big Changes Loom

The SEC declined to comment on the letter. However, new SEC Chairman Paul Atkins has signaled a clear departure from his predecessor Gary Gensler’s aggressive enforcement approach.

Atkins is now exploring the possibility of a “sandbox exemption” that would allow firms to experiment with tokenized securities without being subject to all existing rules. He’s also reviewing more targeted changes to support blockchain trading infrastructure.

🏛️ Stablecoin Law Reshapes the Debate

The debate comes just days after Congress passed—and President Trump signed—a landmark stablecoin law, requiring issuers to back tokens with cash or short-term government securities. The law offers regulatory clarity for dollar-pegged digital assets and is hailed by supporters as a key step toward legitimizing crypto markets, which could grow from $265 billion to $3 trillion by 2030.

Still, not everyone is on board. Senator Elizabeth Warren warned that the law falls short of protecting consumers, even as others celebrate it as a turning point.

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