Tokenized securities must achieve success by delivering real innovation and efficiency to market participants, rather than through self-serving regulatory arbitrage, wrote Citadel Securities in a letter to the US Securities and Exchange Commission (SEC).
Citadel clarified that “tokenized US equities” is defined as the issuance on a blockchain of new “look-a-like” products that are being marketed as an alternative to listed equity securities, and does not include products that are leveraging a blockchain to improve operational workflows when trading traditional equity securities, such as by enhancing clearing and settlement efficiency.
“It is untenable to grant ‘look-alike’ products marketed as an alternative to listed equity securities broad exemptive relief from longstanding regulations that are core to the SEC’s mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. We agree that our regulatory regime can benefit from further enhancements, however, these should be pursued through the standard and transparent rulemaking process,” Citadel wrote.
Citadel took aim at proposals by large, well-established firms seeking to introduce “look-alike” securities, which the firm said cannot be characterized as limited, small-scale projects appropriate for an “innovation sandbox” largely free from SEC regulation.
“We recommend that the Crypto Task Force and the Commission hold additional roundtables on this topic, with representation from various segments of U.S. equity markets (e.g. retail investors, institutional investors, market makers, exchanges, and issuers), and pursue formal rulemaking to the extent that regulatory changes for tokenized U.S. equities are deemed appropriate.”