Citadel Securities has taken a dual position on cryptocurrencies, publicly opposing regulatory exemptions for decentralized finance (DeFi) while co-leading a $500 million investment in Ripple.
The move highlights the widening gulf between institutional support for compliant blockchain infrastructure and skepticism towards fully decentralized protocols.
sponsored
Citadel’s approach to DeFi loopholes
Citadel Securities filed a formal letter with the SEC on December 2, 2025. In its letter, the capital markets firm opposes the carve-out of DeFi platforms that trade tokenized US stocks.
The company argued that decentralized platforms must comply with existing investor protections. The letter raises concerns about transparency, anti-money laundering (AML) and know-your-customer (KYC) compliance, market controls, and custody standards.
“Excluding DeFi from oversight could put investors and the broader market at risk,” the letter warned, calling for consistent regulation across all centralized or blockchain-based trading venues.
This stance drew criticism from cryptocurrency supporters. The Blockchain Association has warned that applying traditional rules to open source protocols can stifle innovation.
The debate reflects historical tensions at the SEC, such as the conflict between former Commissioner Gary Gensler, who favored strict enforcement, and Commissioner Hester Peirce, who advocated regulatory flexibility and often spoke out against it.
sponsored
Despite public opposition to DeFi exemptions, Citadel co-led a $500 million funding round for Ripple.
The investment values Ripple at $40 billion, demonstrating confidence in its regulated and compliance-focused infrastructure. Other participants included Pantera Capital, Galaxy Digital, Brevan Howard, and Marshall Wace.
Ripple has been aggressively expanding in the institutional market. Over the past two years, the company has acquired six companies, including Hidden Road (renamed Ripple Prime), for $1.25 billion. Hidden Road currently serves 300 institutions and processes $3 trillion in transactions annually.
sponsored
Additional acquisitions such as GTreasury ($1 billion) and Rail ($200 million) strengthened Ripple’s storage, payments, and treasury services.
The company’s RLUSD stablecoin has a market capitalization of over $1 billion, and its recent 25% share buyback reflects the company’s financial discipline.
Ripple currently holds 75 global licenses and has processed $95 billion in payments, establishing itself as a bridge between traditional finance and blockchain.
sponsored
Market reaction and its impact
Despite support from institutional investors, XRP fell almost 10% to $2.17 after the investment announcement, reflecting investor uncertainty about its immediate usefulness.
The contrast between Citadel’s public regulatory advocacy and its bets on private markets highlights a broader trend. Institutions prefer blockchain projects that operate within a regulated framework rather than a completely permissionless system.
As regulations improve, capital is increasingly flowing to compliant blockchain solutions, increasing investor protection while maintaining innovation.
Citadel’s move shows that regulatory clarity is now a prerequisite for large-scale institutional adoption, even if it departs from the spirit of DeFi.
