The US Securities and Exchange Commission has officially withdrawn a series of regulatory proposals introduced during the Biden administration—several of which directly impacted the cryptocurrency industry.
In a statement released Thursday, the SEC announced it is rolling back multiple proposed rules submitted between March 2022 and November 2023 under the leadership of former Chair Gary Gensler. The agency confirmed it won’t move forward with finalizing these proposals and indicated that any future changes in approach would involve fresh rulemaking.
This move aligns with the deregulatory agenda of President Donald Trump, who has advocated for reducing government intervention in both traditional and digital financial markets.
“3b-16 is gone, the qualified custodian rule is gone—Gensler’s unfinished rules are falling,” wrote Coinbase’s chief legal officer Paul Grewal on X.
Key Exchange Rule Pulled Back
One of the most notable repeals was Rule 3b-16, which aimed to broaden the definition of a securities exchange. If adopted, this amendment would have brought many decentralized finance (DeFi) platforms under SEC oversight by redefining systems that facilitate trades through communication protocols and non-binding interests.
The expanded language had raised concerns in the crypto sector, as it could have categorized DeFi applications as regulated exchanges.
Initially introduced in March 2022, the proposal faced criticism from within the SEC itself. In March of this year, Commissioner Mark Uyeda publicly suggested abandoning the rule targeting crypto trading platforms.
Custody Rule Withdrawn
The SEC also reversed its proposed update to crypto asset custody requirements. Introduced in March 2023, the Safeguarding Advisory Client Assets rule aimed to revise the Custody Rule under the Investment Advisers Act of 1940.
Although designed to cover all types of client assets, the rule had serious implications for digital assets. It would have required investment advisers to use “qualified custodians,” typically limited to regulated banks and broker-dealers, to hold client crypto.
Since many crypto exchanges and wallet providers did not meet that standard, the rule could have forced advisers to shift away from current custodians or exit the crypto space entirely.
Commissioner Uyeda had previously called for reconsideration of the custody rule earlier this year.
Additional Rollbacks
The SEC’s move also affects other proposed regulations, including cybersecurity reporting requirements for asset managers and funds—rules that would have impacted crypto custodians and digital fund operators.
Proposals related to reporting positions in large security-based swaps, which could apply to firms with heavy exposure to crypto derivatives, were also withdrawn.
Lastly, the agency scrapped its push for stronger ESG (environmental, social, and governance) disclosures from public companies, walking back a major transparency initiative introduced during the previous administration.
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