Hayden Adams Critiques Citadel's SEC Push to Regulate DeFi Like Traditional Finance

Uniswap founder Hayden Adams has expressed strong disapproval of Citadel Securities' recent request to the U.S. Securities and Exchange Commission (SEC) to classify decentralized finance (DeFi) protocols as traditional financial intermediaries. Adams argues that this approach undermines the principles of open, peer-to-peer finance.

Key Takeaways

Hayden Adams criticized Citadel's SEC proposal to regulate DeFi as traditional finance.
Citadel claims that DeFi lacks fair market access and should be treated like centralized financial systems.
The SEC is urged to impose identical regulations on DeFi stakeholders as those on traditional brokers and dealers.
Adams refers to Citadel as an opponent of open-source finance, highlighting their past actions regarding ConstitutionDAO.

Uniswap founder Hayden Adams criticizing Citadel’s SEC DeFi proposal

Hayden Adams vs. Citadel Securities

Uniswap's Hayden Adams has taken a stand against Citadel Securities, which recently filed a request to the U.S. Securities and Exchange Commission (SEC). This request suggested that decentralized finance (DeFi) protocols and their developers should be treated like traditional financial intermediaries.

In a post on the social platform X, Adams vented his frustrations, stating, “First Ken Griffin screwed over Constitution DAO. Now he's coming for DeFi,” expressing concerns that Citadel is lobbying for regulations that would subject DeFi software developers to the same scrutiny placed on centralized intermediaries. He also speculated that Citadel has been working behind the scenes on this issue for quite some time.

Adams took particular issue with a point in Citadel's filing, which argued that DeFi cannot guarantee “fair access” to markets. He criticized this assertion as a misguided stance and referred to Citadel as “the king of shady tradfi market makers,” opposing “open source, peer-to-peer tech that can lower the barrier to liquidity creation,” according to his posts.

What the Dispute Is About

The conflict stems from a letter that Citadel Securities sent to the SEC concerning tokenized equities and DeFi trading platforms. In this document, Citadel argued that many decentralized systems effectively facilitate trade between buyers and sellers, thus fitting existing definitions of exchanges and broker-dealers.

Citadel's filing emphasized that DeFi activities shouldn't receive different regulatory treatment simply because they rely on blockchain technology. The firm pointed out the various participants in the DeFi ecosystem—such as operators of trading interfaces, smart contract developers, validators, and liquidity providers—who could all potentially be subject to regulation.

According to their letter, many of these participants earn fees from transactions or impact order routing, making them functionally akin to regulated financial intermediaries. Citadel called on the SEC to adopt a technology-neutral regulatory framework, applying identical rules to all activities, independent of the technology used.

The submission raised alarms about tokenized stocks, cautioning that permitting tokenized shares of U.S. companies to be traded on DeFi platforms might give rise to a “shadow equity market” that operates outside the established national market system. Citadel warned that such a scenario could lead to fragmented liquidity and bypass existing investor protection and reporting mechanisms governing equities.

Furthermore, Citadel expressed opposition to requests from crypto industry advocates for broad regulatory exemptions, arguing that open-source protocols and validation networks do not function like traditional financial intermediaries, and therefore should not have to register as exchanges or broker-dealers.

The firm insisted that the SEC lacks the authority to create a separate regulatory framework for tokenized equities and asserted that significant changes to U.S. stock trading laws should be initiated by Congress.

Industry observers have pointed out that if Citadel's recommendations are adopted, development teams of DeFi protocols, front-end operators, routing wallets, market makers, and possibly participants in decentralized autonomous organizations (DAOs) could be subjected to registration requirements, capital rules, and obligations similar to those of traditional broker-dealers.

Adams referred back to a 2021 incident where Griffin outbid ConstitutionDAO at a Sotheby’s auction for a rare copy of the U.S. Constitution, thwarting the crypto collective's efforts to acquire the historic document.