Conflict between DeFi and Wall Street heats up debate at the SEC.

• DeFi faces regulatory pressure from the SEC and Wall Street.
• Tokenization advances with debate on blockchain innovation.
• SEC evaluates exemption for digital assets and cryptocurrencies.

The dispute between the crypto sector and traditional institutions has taken a new turn after the Blockchain Association directly challenged Citadel Securities' position on the regulation of decentralized finance.

The debate revolves around how the U.S. Securities and Exchange Commission should treat DeFi protocols, especially at a time when the tokenization of financial assets is advancing and gaining relevance in the global market.

Citadel had argued that many DeFi protocols could be classified as exchanges, since they use automated systems to connect buyers and sellers. The company also suggested a broader regulatory approach, based on public consultation.

The Blockchain Association, on the other hand, rejected this framing. The group argues that protocol developers do not act as traditional financial intermediaries and do not operate stock exchanges.

According to the organization, attempting to fit these structures into rules created for human operators distorts the functioning of blockchain technology. The association also argues that tools such as smart contracts and non-custodial software should not be treated as regulated intermediaries.

The group emphasized that the SEC should move forward with a proposal for an innovation exemption, allowing the trading of tokenized assets in a more flexible regulatory environment. According to the organization, this approach has already been applied to other innovations in the financial sector.

The debate is taking place as the SEC considers opening public consultations on new guidelines for digital assets. Among the topics being discussed is precisely the creation of an experimental model for on-chain assets.

Tokenization has been gaining traction as companies seek to migrate traditional assets, such as stocks, to blockchain infrastructure. This movement promises to increase efficiency and reduce operational costs.

Despite this, the SEC has already indicated that tokenized assets continue to be considered securities and must follow existing rules.

According to the Blockchain Association, overly broad regulation could hinder innovation in the United States. The group argues that this type of approach could lead companies to seek more favorable jurisdictions outside the country, reducing the competitiveness of the American cryptocurrency market.