Market Maker Warns of Liquidity Risks from Blockchain-Based Assets
Citadel Securities, a leading U.S. market maker founded by billionaire Ken Griffin, has urged the Securities and Exchange Commission (SEC) to slow the rollout of tokenized securities, warning that rapid adoption could trigger market instability and harm traditional equity markets.
In a formal letter to the SEC’s Crypto Task Force, Citadel expressed concern over regulatory gaps that could allow crypto platforms to gain unfair market advantages.
Tokenized Securities: Speed and Fractional Trading, But At What Cost?
Tokenized securities are blockchain-based financial products that offer 24/7 trading, faster settlement times, and fractional ownership. While these innovations promise efficiency and accessibility, Citadel believes they pose systemic risks if adopted without firm regulation.
The firm warned that these new instruments could siphon liquidity from regulated U.S. equity markets, where institutional price discovery remains vital.
Citadel emphasized that investor confusion and uneven regulatory expectations could erode trust and amplify volatility, especially if digital asset platforms operate under lighter compliance burdens than traditional exchanges.
Citadel’s Position Echoes Broader Wall Street Caution
The letter follows a broader trend of Wall Street skepticism toward unregulated blockchain products entering legacy markets. While tokenization is seen as a potential breakthrough for clearing, settlement, and capital efficiency, top financial institutions are calling for clearer guardrails before allowing open market integration.
Citadel’s opposition signals a larger debate between traditional finance players and crypto-native platforms over how innovation should be implemented.
The firm also highlighted fairness concerns, arguing that unless tokenized assets are subject to the same market surveillance and transparency rules, retail and institutional traders may face an uneven playing field.
SEC Faces Pressure from Both Sides
The SEC is currently considering proposals that would allow regulated trading venues to support tokenized securities at scale. These moves are driven by demand for modernized market infrastructure, but they also face pushback from firms like Citadel concerned about fragmentation of liquidity and regulatory arbitrage.
As the SEC weighs its next steps, Citadel’s warning could influence how quickly tokenized securities are brought into the mainstream.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.