SEC Withdraws 14 Crypto Rules Reflecting Policy Shift

The US Securities and Exchange Commission (SEC) has announced the withdrawal of 14 proposed rules, including key measures that were previously aimed at the crypto industry. This decision, made public on June 12, reflects a shift in the agency's regulatory priorities, moving away from the aggressive stance adopted during the tenure of former SEC Chair Gary Gensler.

The rescinded proposals, introduced between March 2022 and November 2023, had faced significant opposition from crypto advocates. Two of the withdrawn rules would have had a direct impact on how digital assets are managed and traded in the US. One rule sought to expand the definition of securities exchanges to include decentralized finance (DeFi) platforms. This proposal aimed to bring a wide range of blockchain-based systems under the SEC’s jurisdiction by classifying them as exchanges. Another rule targeted crypto custody practices, requiring investment advisers to store all client assets, including digital assets, with qualified custodians. Under this framework, many established crypto custodians would have failed to meet the SEC’s stricter criteria, leaving only banks and broker-dealers eligible to safeguard assets.

Eleano Terret, a former journalist, commented on the Custody Rule, stating that it aimed to cover all client assets, including crypto, and broadened what counts as ‘custody.’ This raised concerns about whether certain state-chartered entities should be qualified custodians. Critics argued that these rules would have imposed undue restrictions on the sector, stifling innovation and driving activity offshore.

The SEC’s decision to abandon these proposals is part of a broader effort to clarify crypto regulation. It aligns with President Donald Trump’s deregulatory push to reduce compliance burdens in both traditional and digital markets. In recent months, the SEC has dropped several lawsuits against crypto companies, signaling a retreat from the previous regulation-by-enforcement approach. The financial regulator’s new Chair, Paul Atkins, has made concrete efforts to introduce pro-crypto regulations, which are expected to foster responsible innovation in the sector.