In a significant regulatory confrontation, top Wall Street firms including JPMorgan and Citadel, alongside the powerful securities industry trade group SIFMA, met with the U.S. Securities and Exchange Commission's (SEC) crypto task force on Tuesday, January 27, 2026. The closed-door meeting centered on expressing deep concerns over the SEC's proposed plans to grant sweeping regulatory exemptions for the cryptocurrency sector, particularly for tokenized securities and decentralized finance (DeFi) projects.
The financial institutions argued that the SEC's "permissive approach" and its imminent plans to provide "exemptive relief" for tokenized securities could destabilize the broader U.S. economy and undermine investor protection. SIFMA, which prepared materials for the meeting, stated that "broad exemptions for tokenized trading activities could undermine investor protection and lead to market disruptions." The group emphasized that "regulatory treatment should be based on economic characteristics, not on the technology used or categorical labels (e.g., 'DeFi')."
A key point of contention was the reference to the October crypto flash crash, which saw approximately $19 billion in liquidations in a single day—the largest such wipeout in history. The Wall Street representatives used this event as a cautionary example of what could occur if tokenized securities were allowed to trade outside existing securities laws, warning of potential contagion effects into traditional markets.
This pushback comes as SEC Chair Paul Atkins recently promised to formalize innovation exemptions for crypto by the end of January 2026. These exemptions would provide crypto companies and projects with legal assurances that they would not face securities law violations for experimenting in certain areas. However, the meeting highlights a growing rift between established financial institutions and regulatory approaches to crypto innovation.
The debate is further complicated by the stalled progress of a comprehensive crypto market structure bill in Congress. Negotiations have been derailed by various inter-industry battles, including one between Coinbase and the banking lobby over rewards on stablecoin holdings. While DeFi advocates had reportedly made progress in negotiations with SIFMA earlier in the month, they were reportedly unaware of Tuesday's meeting with the SEC.
Representatives for Citadel and JPMorgan did not immediately respond to requests for comment following the meeting, and a SIFMA representative declined to comment. The outcome of this confrontation is expected to significantly influence the final shape of the SEC's regulatory framework, balancing the desire to foster U.S. crypto innovation against warnings from some of the world's most powerful financial institutions.
