In a significant regulatory shift, the U.S. Securities and Exchange Commission (SEC) has rescinded several cryptocurrency rule proposals established during Gary Gensler's tenure. SEC Chair Paul Atkins announced the reversal on June 13, 2025, marking a pivotal moment for the crypto industry, which had been bracing for stricter oversight.
Among the proposals withdrawn were amendments to Exchange Act Rule 3b-16, intended to classify decentralized finance (DeFi) protocols as securities exchanges. This classification raised concerns about potentially heavy regulatory burdens on decentralized platforms, prompting backlash from blockchain developers and legal experts. “The move would permanently conflate DeFi infrastructure with traditional securities exchanges, hampering innovation,” said a representative from the crypto sector.
Accompanying this was a proposed custody rule that aimed to mandate investment advisers to place all client crypto assets with “qualified custodians” such as banks or registered broker-dealers. Critics argued that this rule would limit choices for clients and elevate costs, effectively sidelining many crypto-native custodians. Proponents of the proposal suggested that these measures were vital for ensuring client protection and robust safeguards.
In its announcement, the SEC confirmed that it would not continue the finalization of these regulatory proposals and hinted at possible future rulemaking. This decision culminates a broader retreat from Gensler-era initiatives, which has included abandoning plans for environmental, social, and governance (ESG) reporting mandates alongside cybersecurity obligations. Mark Uyeda, the acting chair of the SEC, initially suspended the DeFi exchange and custody rules in March, and this formal withdrawal reinforces that earlier action.
Market participants reacted positively to the SEC's announcement. Paul Grewal, chief legal officer at Coinbase, expressed his satisfaction on social media, stating, “The agency had scrapped 3b16, qualified custodian, and all other unfinished Gensler rule proposals.” The rollback has been interpreted by many crypto platforms as an endorsement of self-custody and decentralized financial innovation.
The reaction from institutional stakeholders has also been favorable. Brian Laverdure, Senior Vice President of Digital Assets and Innovation Policy at the Independent Community Bankers of America (ICBA), remarked that the SEC’s editorial note had “withdrawn several NPRMs,” sending waves of confidence through community banks and investment advisers.
This deregulatory approach reflects President Trump’s commitment to reducing market regulations. In alignment with this, the SEC staff and the Financial Industry Regulatory Authority (FINRA) dismantled a longstanding joint statement from 2019 regarding broker-dealer custody of digital asset securities on May 15. This change allows regulated intermediaries to offer cryptocurrency custody services without facing new restrictions.
Uyeda's recent comments in March also mirror the SEC's new direction, with emphasis on the importance of not overregulating emerging financial technologies, aiming instead to foster innovation while ensuring market integrity.
As the SEC transitions away from stringent oversight on crypto, it appears to be pioneering a regulatory climate that seeks to balance innovation with safeguarding practices. The future of cryptocurrency regulations under the SEC may hinge on continued dialogue between regulators and industry stakeholders, shaping how this rapidly evolving market will operate.