Marking a major reversal of Biden-era policy, the U.S. Securities and Exchange Commission has withdrawn key measures targeting crypto custody and decentralized exchanges.
On Thursday, the commission confirmed it was formally rescinding 14 proposed rules introduced between March 2022 and November 2023, including several that sought to expand regulatory oversight of digital assets.
In a notice, the SEC stated it was “withdrawing certain notices of proposed rulemaking” and made clear that it does not intend to issue final rules on these matters.
“If the Commission decides to pursue future regulatory action in any of these areas, it will issue a new proposed rule,” the SEC said.
Among the withdrawn rules was the proposed amendment to Rule 3b-16 under the Exchange Act, which aimed to redefine what qualifies as an “exchange” under federal securities laws.
The amendment, first proposed in March 2022, would have extended the exchange definition to include communication systems that facilitate trading in crypto and decentralized finance protocols.
Critics have warned that the language used in Rule 3b-16 could have treated many DeFi platforms as regulated securities exchanges, even if they merely offered protocols for buyers and sellers to interact without direct intermediaries.
Also scrapped was the proposed Safeguarding Advisory Client Assets rule, introduced in March 2023, which would have tightened custody requirements for registered investment advisers, mandating that all client assets, including crypto, be held with a “qualified custodian.”
Most crypto-native custody providers did not meet the proposed definition, raising concerns that investment advisers would face limited options or be forced to exit digital asset markets altogether.
Thursday’s rollback reflects a broader reorientation within the SEC. Under the Trump administration, the commission has moved away from enforcement-led policy, pivoting toward what it calls a “constructive” regulatory stance.
Spearheading that change is SEC Chair Paul Atkins, a former commissioner and longtime advocate of limited government intervention. Since taking office in April, Atkins has directed the agency to scale back enforcement-led strategies in favour of clearer, innovation-friendly policies.
As part of this overhaul, the SEC established a new Digital Assets Task Force to reassess its approach to crypto oversight. Within weeks, the task force moved to close several high-profile investigations, including cases involving Coinbase, Kraken, ConsenSys, Yuga Labs, and OpenSea, among others.
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