The Blockchain Association has formally opposed Citadel’s call for stronger decentralized finance regulation, submitting a comment letter to the U.S. Securities and Exchange Commission. In its filing, the group argued that developers of DeFi protocols should not be treated as brokers or exchange operators, since those labels have historically applied to financial intermediaries rather than software builders publishing open protocols.
Debate centers on how DeFi fits existing rules
The association’s main position is that the SEC should not automatically apply traditional market structure definitions to decentralized systems. According to the letter, broker and exchange operator classifications are generally tied to entities that control customer relationships, facilitate transactions, or act as intermediaries. DeFi developers, the group contends, do not necessarily perform those same roles and therefore should not be placed into identical regulatory categories by default.
Call for an “innovation exemption” framework
Beyond opposing a broader interpretation of existing rules, the Blockchain Association also urged the SEC to consider an “innovation exemption” framework. The proposal would create a regulatory sandbox for on-chain assets and tokenized securities, allowing new products and technological models to develop within a more clearly defined compliance environment. The group said such an approach could speed up adoption while reducing the risk that innovation leaves the United States because of slow rulemaking processes.
Citadel favors more formal oversight measures
Citadel had previously recommended that the SEC strengthen DeFi oversight through more formal legislative or rule-based action. That difference highlights a broader divide between traditional financial players and crypto industry advocates: one side is pushing for firmer regulatory controls, while the other is asking regulators to recognize the distinct structure of decentralized networks and preserve room for experimentation.
The dispute underscores a larger policy question for U.S. regulators. How the SEC responds to competing views from established financial institutions and blockchain industry groups could shape the future of DeFi, tokenized assets, and the pace of on-chain financial innovation in the U.S. market.