The U.S. Securities and Exchange Commission (SEC) has formally rescinded a number of widely-criticized rules. These rules were originally proposed under former Chair Gary Gensler. Should that happen, this would be a highly consequential decision that would reflect the agency’s considerable pivot toward aggressively regulating digital assets. The decision represents an important step towards more transparent rule-making and increased engagement with the crypto space.
As of January 2025, the SEC has been rethinking its approach to crypto under Chair Paul Atkins. The new administration is making it clear that its focus will be on instructions and consultation rather than an enforcement-based shake down. This change of course follows increasing outcry that the prior proposals were an overreach and were unclear in terms of real-world implementation.
DeFi Rule Reversal
Perhaps the most significant withdrawal is the amendment to Exchange Act Rule 3b-16. The amendment would have brought decentralized finance (DeFi) platforms within the purview of national securities exchange regulations. This proposal, which was first launched by Chair Gary Gensler himself, has generated tremendous outcry from the crypto community. They claimed that it would kill innovation and pay no mind to the special nature of DeFi. To date, the SEC has formally withdrawn just one DeFi exchange proposal.
Gary Gensler led the SEC between 2021 and January 2025, and his tenure was marked by an enforcement-focused approach to crypto regulation. This was seen by many in the industry as incredibly stifling to innovation. The withdrawal of the DeFi rule is an encouraging sign that the administration is moving away from this action-prone approach.
The SEC, under Chair Paul Atkins, has expressed a similar desire for users to retain custody over their digital assets. This position marks a significant shift from past rhetoric expressing an interest in the security of user-held digital assets.
Crypto Custody Rule Scrapped
The second big decision is the formal withdrawal of the contentious crypto custody rule. This rule, similarly proposed under Gensler, would have placed onerous obligations on firms custodying digital assets. Then in March 2025, Acting Chair Mark Uyeda shot a warning flare, encouraging SEC staff to reconsider the proposed custody rule. This request follows increasing bipartisan opposition to the rule.
Critics claimed that the rule as written was unfeasible and would be more burdensome on smaller firms. The SEC's decision to withdraw the rule suggests a willingness to address these concerns and adopt a more flexible approach.
ETF Applications and Reviews
Even with the rollback of some of these regulations, the SEC still is closely examining new crypto investment products. On June 10, the SEC issued a further delay of Canary Capital’s HBAR ETF application to allow for further regulatory scrutiny.
"make us a global crypto hub" - Paul Atkins
As of June 11, the SEC began their review on the Bitwise Dogecoin ETF and asked for public comments. The SEC just extended the review for Grayscale’s Hedera Trust on June 12. These enforcements are an indication that the SEC is adopting a more consultative stance. It remains absolutely committed to protecting investors and ensuring the integrity of our markets.
