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- The Blockchain Association warns SEC rules may misclassify crypto infrastructure, slowing innovation.
- Citadel urges tighter crypto oversight, opposing exemptions for tokenized equity trading.
- Group backs flexible SEC approach using phased frameworks to support crypto market growth.
The Blockchain Association has urged the U.S. Securities and Exchange Commission (SEC) to avoid applying traditional rules to crypto-based systems in ways that could hinder tokenized finance. The group warned that rigid interpretations may misclassify blockchain technology and slow innovation.
The request came through a formal filing submitted on Monday. It responds to earlier arguments made by Citadel Securities. The market-making firm had called for tighter oversight of blockchain trading systems and tokenized equities.
The main issue centers on how blockchain tools should be treated under securities laws. The association said validators, smart contracts, and non-custodial protocols act as infrastructure. It stressed that these systems do not function like brokers or exchanges.
Tokenization Pushes Regulatory Shift
The group argued that applying the same regulatory framework could create mismatches. It said such an approach may impose rules that do not fit how these systems operate. This concern is growing as tokenization moves closer to wider financial use.
Tokenization aims to bring traditional assets onto blockchain networks. Supporters say it can improve trading, settlement, and custody functions. They also highlight faster processes and better transparency across markets.
The association compared this shift to past changes in financial systems. It pointed to the move from floor trading to electronic trading. That transition also required adjustments in market rules.
Summer Mersinger, CEO of the Blockchain Association, addressed the issue directly. She said tokenization introduces better technology to key capital markets. She added that the filing supports ongoing policy efforts in Washington.
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Mersinger also noted the potential benefits for U.S. finance. She said improved systems could increase efficiency and resilience. She also highlighted the importance of staying competitive at a global level.
Citadel Securities has taken a different position on the matter. The firm previously urged the SEC to increase oversight of decentralized finance platforms. It also opposed broad exemptions for tokenized equity trading.
Crypto Rules Debate Intensifies
According to Citadel, there should be no changes to existing definitions of exchanges and broker-dealers because that would allow exceptions, resulting in an unfair regime with different regulations of identical assets. In turn, this could cause confusion on the market.
The Blockchain Association noted that it is not asking to be exempted from any regulations, but to make some modifications to them, which can be achieved by using existing regulatory instruments.
Some of the approaches include exemptive relief and phased frameworks. Such approaches were used previously with the emergence of new market structures and helped in maintaining innovation without causing any disruptions.
The discussion shows one more challenge for policymakers in the cryptocurrency industry, which is determining the direction of innovations’ development in this market. Depending on the decision, innovation might occur in the United States or another country.
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