Week of December 15, 2025: DEF’s Response to Citadel Securities; SEC Roundtable on Financial Surveillance and Privacy; SAFE Crypto Act; FCA Consultation Paper

DEF Submits Letter to SEC Responding to Citadel’s Mischaracterizations of DeFi

On December 12, 2025, DEF, together with a16z Crypto, The Digital Chamber, Orca Creative, J.W. Verret, and Uniswap Foundation, submitted a response to Citadel Securities’ letter to the Securities and Exchange Commission (SEC) advocating for the SEC to regulate DeFi technologies, developers, and blockchain infrastructure providers as securities intermediaries. In their letter, Citadel blatantly miscited DEF and misrepresented how DeFi technology works.

As we explain in our response, Citadel not only mischaracterized DEF’s prior submissions to the SEC, but also relies on a flawed analysis of the securities laws that attempts to extend SEC registration requirements to any entity with even the most tangential connection to a DeFi transaction. Citadel alleged that everything from validators to self-custody wallet providers to “smart contract developers” are “intermediaries” like securities brokers. 

DEF’s letter addresses Citadel’s misleading arguments about DeFi technology. Importantly, we cite-check Citadel and highlight their faulty citations and mischaracterizations of the source material in an easy-to-read table. 

DeFi technology is intermediary-less and enables users to retain full custody and control of their own assets. DeFi developers, noncustodial software protocols, and blockchain base-layer infrastructure providers do not operate as intermediaries. Misclassifying the technology or its developers under such frameworks evidences a fundamental misunderstanding of their function and structure. 

DEF will continue to advocate for an accurate characterization of DeFi technology, protecting developers and the ecosystem from misrepresentation and improper regulatory treatment. We are thankful to our cosignatories for joining us and standing up for DeFi.

SEC Hosts Roundtable on Financial Surveillance and Privacy

On December 15, 2025, the SEC Crypto Task Force convened a Roundtable on Financial Surveillance and Privacy, bringing together relevant regulators, academics, civil liberty advocates, and developers. SEC Chairman Paul Atkins opened the discussion by reaffirming that freedom from unwarranted surveillance is a core American value and cautioned that crypto, if misregulated, could become the most powerful financial surveillance infrastructure ever created. 

During the roundtable, panelists demonstrated privacy-preserving product solutions mechanisms such as zero-knowledge proofs and discussed topics including selective disclosure, multi-party computation, programmable compliance, and smart-contract-level privacy.

Notably, during the audience Q&A session (starting from approximately 4:17:00 of the recording), a developer in the audience raised concerns about the lack of legal protections for developers. He mentioned that, without these protections, there would be little incentive to keep innovation building in the United States, and no guarantee that developers will be protected in future administrations. This concern highlights the critical need to include robust developer protections in market structure legislation. 

This past August, DEF led a coalition of 110+ organizations urging Congress to protect developers in market structure legislation. Read the full letter here.

Senators Slotkin and Moran Introduce Legislation to Crack Down on Cyber Scams

On December 15, 2025, Senator Elissa Slotkin (D-MI) and Senator Jerry Moran (R-KS) introduced the bipartisan Strengthening Agency Frameworks for Enforcement of Cryptocurrency (“SAFE Crypto”) Act, which would create “a federal task force that unites law enforcement, regulators, and private-sector experts to launch a coordinated effort to identify, track, and stop crypto fraud.” 

The proposed task force, chaired by the Treasury Secretary, would include leaders from federal agencies—such as the Attorney General, the Financial Crimes Enforcement Network (FinCEN), and the U.S. Secret Service—along with state and local law enforcement. The bill also seeks participation from stablecoin issuers, crypto exchanges and custodians, blockchain intelligence providers, consumer and scam victim advocates, and state banking regulators.

Read the full text of the proposed legislation here. 

UK FCA Seeks Feedback on Proposals for UK DeFi Rules

On December 16, 2025, the United Kingdom’s Financial Conduct Authority (FCA) published Consultation Paper CP25/40 setting out its proposed approach to regulating crypto asset activities and seeking public comment.

Chapter 7 of CP25/40 (“Decentralised Finance (DeFi)”) covers proposals concerning consideration of the degrees of decentralization and control in blockchain networks, examples of good practices to support firms mitigating key risks and harms of financial crime, and operational resilience. Notably, the FCA recognizes that genuinely decentralized arrangements may fall outside of the regulatory perimeter and provides factors for assessing whether activities are truly decentralized, including elements of control. 

The FCA has requested feedback on the proposals by February 12, 2026. DEF will monitor for developments.

DeFi Dictionary

For the Word of the Week, we are throwing it back to the root of crypto: Asymmetric Cryptography. 

Notable and Quotable 

“Indeed, if the instinct of the government is to treat every wallet like a broker, every piece of software as an exchange, every transaction as a reportable event, and every protocol as a convenient surveillance node, then the government will transform this ecosystem into a financial panopticon.” – SEC Chairman Paul Atkins in Remarks at the Financial Surveillance and Privacy Roundtable 

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