Citadel Securities is urging U.S. regulators to slow down on efforts to expand trading of tokenized securities, warning that the move could rattle equity markets and confuse investors.
In a letter to the SEC’s Crypto Task Force, the market-making giant raised concerns about allowing blockchain-based assets to gain ground without clear regulatory guardrails. Tokenized securities — which can be traded around the clock, settled faster, and broken into fractional shares — are gaining traction, with platforms like Gemini, Robinhood, and Backed Finance rolling out offerings.
Citadel argued that without proper oversight, tokenized products could pull trading activity away from public markets and into fragmented liquidity pools that traditional institutions, such as pension funds or endowments, may struggle to access.
“Tokenized securities must succeed by offering actual improvements in market structure — not by exploiting regulatory gray zones,” the firm wrote.
The comments land as SEC Chair Paul Atkins floats ideas to modernize securities laws, including a possible “innovation exemption” to help fast-track new financial products. Atkins has compared tokenization’s potential to the leap from CDs to digital audio.
Supporters say tokenized assets can cut out middlemen, improve settlement times, and open up investment access through fractional ownership. Real-world tokenized assets now top $25 billion in value, according to data from RWA.xyz. Big names like BlackRock, Franklin Templeton, and Coinbase are already in the mix.
But Citadel isn’t buying the hype, at least not yet. The firm warned that letting tokenized markets develop in parallel could sideline IPOs and traditional capital raising. Private companies might turn to token offerings instead of going public, draining liquidity from stock exchanges in the process.
That shift could have knock-on effects, Citadel said, especially if large chunks of capital end up in “walled-off” trading venues that exclude many institutions.
Citadel’s concerns echo a broader unease among legacy financial firms as regulators inch closer to a crypto-friendly posture under the new administration. While banks like JPMorgan are reportedly exploring crypto-backed loans, firms caution that custody, collateral volatility, and liquidation rules remain thorny.
“Bitcoin-backed lending isn’t just about holding assets — it’s about managing what happens when markets move quickly,” said Ledn CEO Adam Reeds. “Institutions need clarity on where and how those assets are secured.”
