TLDR
- Citadel warns SEC: Tokenized securities risk draining liquidity, urge slowdown
- Tokenized assets threaten traditional markets, Citadel urges cautious regulation
- Citadel: Fast tokenization may disrupt equity flows and sideline key investors
- Citadel to SEC: Don’t trade market stability for flashy tokenized innovation
- Tokenized securities need rules, not speed, Citadel tells SEC amid concerns
Citadel Securities has raised serious concerns about the U.S. Securities and Exchange Commission (SEC) push for tokenized securities, urging restraint in regulatory changes. The firm believes the rapid rollout could disrupt equity markets and shift liquidity into inaccessible pools. Tokenized securities remain the keyword in the current debate surrounding digital finance and traditional market structures.
Tokenized Securities May Drain Liquidity From Traditional Markets
Citadel Securities has called on the U.S. Securities and Exchange Commission to slow the approval of tokenized securities. The firm argues that without clear regulations, tokenized securities could divert liquidity from traditional exchanges. As a result, public equity markets may lose key capital flows that support stable trading environments.
Citadel Securities is pushing the SEC to prioritize real innovation in securities tokenization. As regulators consider new rules, it's crucial that these efforts foster true advancements rather than just create regulatory loopholes. The future of finance… https://t.co/4go6PuSIjO
— CRYPTO PANZER 🚀 (@CryptoPanzerHQ) July 22, 2025
This shift could impact pensions, endowments, and banks that operate under strict rules and cannot access new liquidity venues. Citadel explained that tokenized securities, if not properly structured, will create parallel markets outside established investor protections. Moreover, such changes could sideline large market participants, weakening the existing financial ecosystem.
Citadel insisted that the SEC use formal rulemaking procedures instead of informal guidance to implement any tokenized securities framework. This approach would help ensure market transparency, fairness, and consistency for all participants. The firm emphasized that proper oversight must accompany innovation to avoid creating regulatory loopholes.
Efficiency Claims Face Scrutiny From Traditional Market Players
Tokenized securities promise benefits like faster settlements, 24/7 trading, and fractional ownership, which digital platforms widely promote. However, Citadel remains skeptical that these features alone justify major regulatory shifts. The firm stressed that tokenized securities must offer meaningful gains, not just operate under less restrictive rules.
Firms like BlackRock and Coinbase have entered the tokenized securities market, supporting its potential for reshaping capital flows. Yet, critics argue that many tokenization efforts prioritize speed over sound infrastructure and investor protection. Tokenized securities platforms often avoid broker-dealer requirements, creating uneven competition.
SEC Chairman Paul Atkins has supported modernization of securities laws to foster digital finance growth, including tokenized securities. He has proposed an innovation exemption to boost blockchain-based asset offerings. However, Citadel noted that any such changes must align with existing legal standards and market stability goals.
Tokenization Could Reshape Capital Formation Channels
Citadel warned that tokenized securities might undercut the public listing process by offering firms alternative ways to raise capital. This could weaken the IPO pipeline and reduce transparency in corporate finance. Tokenized securities, if unrestricted, could encourage companies to stay private longer, bypassing disclosure rules.
This trend may limit access to important financial information and hurt long-term market integrity. Citadel stated that tokenized securities must be integrated through deliberate policy, not rushed to gain competitive edge. Institutions require regulatory clarity to avoid fragmentation and dislocation across financial markets.
The market-making firm emphasized that innovation should not come at the expense of market order or transparency. As more firms experiment with tokenized securities, the SEC must balance modernization with responsibility. Therefore, tokenized securities must deliver true economic value, not short-term regulatory advantages.
