Key Highlights
- Blockchain Association urged the SEC not to apply outdated rules that could slow tokenized market innovation.
- The group argued that blockchain systems function as infrastructure, not intermediaries like brokers or exchanges.
- It called for flexible regulation to prevent innovation from moving outside the U.S.
The Blockchain Association is urging the U.S. Securities and Exchange Commission (SEC) to avoid applying traditional market rules in ways that could hinder tokenized finance.
In a filing on Monday, the group pushed back against arguments from a U.S. market-making firm, Citadel Securities, which called for tighter oversight of blockchain-based trading systems and tokenized equities.
The core dispute: Infrastructure vs intermediaries
According to the official release, at the center of the debate is how blockchain infrastructure should be treated under existing securities laws.
The industry group argues that tools such as validators, smart contracts, and non-custodial protocols function as infrastructure, not intermediaries like brokers or exchanges. Applying the same regulatory framework, it says, risks misclassifying the technology and imposing requirements that do not fit how these systems operate. This distinction is becoming more relevant as tokenization, bringing traditional assets onto blockchain networks, moves closer to mainstream financial use.
Tokenization and market structure
Tokenized markets aim to replicate and, in some cases, improve core financial functions such as trading, settlement, and custody. Supporters argue that blockchain-based systems can reduce settlement times, improve transparency, and streamline how assets and collateral move across markets. The comparison often drawn is the shift from floor trading to electronic systems in previous decades.
Meanwhile, Summer Mersinger, CEO of Blockchain Association, stated, “Tokenization is about bringing better technology to the most important capital markets in the world. This filing reflects Blockchain Association’s broader commitment to advancing tokenization policy in Washington and ushering in a market evolution that can make U.S. finance more efficient, more resilient, and more globally competitive.”
Citadel’s call for regulation on DeFi
The filing comes months after Citadel Securities urged the SEC to apply more pressure on decentralized finance (DeFi) platforms and avoid granting broad exemptions that would allow U.S. investors to trade tokenized U.S. equities through these DeFi platforms without traditional oversight.
At the time, Citadel argued that the SEC should avoid giving wide exceptions from the rules that define what an “exchange” or “broker-dealer” is. The firm added that doing so could create two different sets of rules for the same stock, which could be confusing and unfair.
A call for regulatory flexibility
The group is not asking for exemptions from securities rules but is calling for how those rules are applied to evolve alongside the technology.
It points to tools already available to regulators, such as exemptive relief and phased frameworks, that have historically been used to accommodate new market structures without stalling development. The concern is that a rigid interpretation could slow experimentation and push innovation outside the United States.
Competitive pressure and policy direction
The debate reflects a broader policy question: whether tokenized financial infrastructure will be developed domestically or shift to other jurisdictions with more adaptable regulatory approaches.
As discussions around digital assets continue, the outcome may shape how quickly tokenized securities and decentralized trading systems integrate into mainstream markets, and where that integration ultimately takes place.
Also Read: The Crypto Backdoor: How Russia Is Rewiring Payments Through Africa
