13-6-2025 – The United States Securities and Exchange Commission (SEC) has withdrawn a series of proposed rules, including pivotal measures targeting cryptocurrency custody and exchanges, as announced on Thursday. This rollback, encompassing 14 regulatory proposals introduced between March 2022 and November 2023 under former SEC Chair Gary Gensler, aligns with President Donald Trump’s broader agenda of deregulation across both digital and traditional financial markets.
Among the rescinded proposals is Rule 3b-16, which sought to redefine an “exchange” to encompass decentralised finance (DeFi) protocols. Initially tabled in March 2022, this amendment aimed to classify systems facilitating buyer-seller interactions through non-firm trading and communication protocols as securities exchanges. Had it been enacted, many DeFi platforms could have faced stringent oversight. Acting SEC Chair Mark Uyeda, as early as March, advocated for abandoning this expansion of “alternative trading systems” to include crypto entities, a stance now formalised.
Equally notable is the withdrawal of a March 2023 proposal to strengthen custody requirements for digital assets. The Safeguarding Advisory Client Assets rule, an extension of the Investment Advisers Act of 1940, would have mandated that investment firms safeguard all client assets, including cryptocurrencies, with “qualified custodians” such as regulated banks or broker-dealers. As most crypto exchanges and wallet providers fall outside this definition, the rule could have compelled advisers to overhaul their operations or retreat from the crypto space entirely. Uyeda’s March directive to reconsider this proposal has now culminated in its complete abandonment.
The SEC’s retreat extends beyond crypto-specific rules. Proposals for enhanced cybersecurity risk management for investment advisers and funds, which would have impacted crypto fund managers and digital asset custodians, have also been shelved. Similarly, a rule requiring position reporting for large security-based swaps—potentially affecting firms with significant crypto derivatives exposure—has been revoked. Additionally, the regulator has scrapped plans to enforce stricter environmental, social, and governance (ESG) reporting obligations on public companies.
The SEC has stated it has no immediate plans to finalise these withdrawn proposals but noted that fresh rules could be introduced should its regulatory priorities evolve. Coinbase’s chief legal officer, Paul Grewal, celebrated the decision on X, hailing the demise of Rule 3b-16, the custody proposal, and other unfinished Gensler-era initiatives. This sweeping rollback marks a turning point for the crypto industry, offering respite from what many viewed as overly restrictive regulatory ambitions.
