SEC Withdraws Crypto Rule, Drops Enforcement Cases

The Securities and Exchange Commission (SEC) has decided to withdraw a proposed rule that could have significantly expanded its regulatory oversight over crypto exchange platforms. This move, led by Acting Chair Mark Uyeda, marks a shift in the agency's approach to digital asset regulation. The rule, introduced under former Chair Gary Gensler, aimed to redefine what qualifies as an exchange by including certain “communications protocols.” This broad definition would have affected multiple digital asset businesses, requiring them to register with the SEC.

Uyeda argues that the definition was unclear and risked regulating protocols that were never intended to fall under the SEC’s oversight. The rule has been under consideration for years, and Gensler was potentially in favor of implementing it. Had it been implemented, it would have been significantly damaging for major exchanges. However, Uyeda has now instructed the agency’s staff to stop pursuing it.

This reversal reflects a broader shift in the SEC’s stance on crypto under the new leadership. Several regulatory actions taken during Gensler’s tenure are now being revisited or rolled back. At the same time, the SEC has dropped multiple enforcement cases against crypto firms. Over the past week, at least six cases have been dismissed, including actions against several prominent companies in the industry.

This marks a significant change in the SEC’s approach to crypto regulation. The agency’s Crypto Task Force, led by Commissioner Hester Peirce, is focusing on industry engagement. The task force includes experts who will host roundtables starting on March 21 to discuss compliance challenges and digital asset policies. These discussions aim to foster a more collaborative approach to regulating the crypto industry, addressing the concerns and challenges faced by businesses operating in this space.

With the SEC shifting its regulatory focus, the crypto industry is watching closely to see how these changes will impact businesses. The withdrawal of the proposed rule and the dismissal of enforcement cases suggest a more lenient regulatory environment, which could provide relief to crypto exchanges and other digital asset businesses. However, the industry remains cautious, as the SEC’s new approach is still evolving, and future regulatory actions could have significant implications for the sector.