Citadel Securities is pushing US regulators to delay new rules that allow for widespread trading of tokenized securities, citing concerns about market disruption and investor disruption.
In a letter to the Securities and Exchange Commission’s Cryptody Task Force, the market-building company argued that by allowing these blockchain-based products to move forward without a clear regulatory framework, it could create unfair benefits for cryptocurrency platforms and emit liquidity from traditional stock markets.
Tokenized security brings traditional assets to blockchain, with tokenized stocks taking off this year, with offerings from backed finance, Gemini, Robinhood, among others.
Advocates point out that tokenized securities are fractionated for 24 hours, providing faster settlements, as well as being usable within the distributed finance (DEFI) space. However, Citadel is not convinced that profits outweigh risks.
“Tokenized securities must achieve success by providing real innovation and efficiency to market participants rather than selfish regulatory arbitration,” the company wrote in its letter.
The comment is because SEC Chair Paul Atkins recognizes that he will update the securities law to support financial innovation, including tokenization.
Citadel encouraged movement in that direction to go through a fragmented rulemaking process. It flagged potential harm to the early public offering markets, as it offered private companies another option to raise capital and another option to “leave Siphon liquidity” from the stock market.
That liquidity could move into a “pool inaccessible” to institutions that include pensions, donations, banks and other businesses, Citadel added.
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