A wave of regulatory withdrawals from the U.S. Securities and Exchange Commission (SEC) has swept away a series of proposals introduced under Joe Biden’s presidency. Among those discarded are two major initiatives that had aimed to impose tighter oversight on the cryptocurrency industry, including decentralised finance (DeFi) platforms and asset custody practices.
This latest development marks a notable reversal in policy direction under the administration of President Donald Trump, which has signalled a broader push to loosen restrictions across both crypto and traditional financial systems. The SEC, now under new leadership, has clarified that these proposals will not proceed to finalisation and will only be reconsidered if future regulatory needs demand it.
Image 1: (Source: Dynamis LLP)
Shift in Crypto Oversight Strategy
One of the dropped rules had sought to redefine the term “exchange” in a way that would have captured DeFi systems operating without intermediaries. Introduced in March 2022, the amendment to Rule 3b-16 would have brought decentralised trading networks under the same legal framework used for conventional securities exchanges.
By broadening the scope of what constitutes a trading venue, the proposal raised alarms within the crypto sector. It suggested that protocols which merely facilitated connections between buyers and sellers—without executing trades themselves—could be subject to exchange registration. Such a move would have made regulatory compliance difficult for many blockchain-based projects due to their decentralised structures.
The retreat from that proposal follows earlier hints from Commissioner Mark Uyeda, who suggested a review of the rule was underway earlier this year. The agency has now formally backed away from it, putting any future expansion of the exchange definition on indefinite hold.
Industry Welcomes Regulatory Pause
Paul Grewal, the chief legal officer at Coinbase, acknowledged the development on social media, noting the SEC’s decision to drop several pending rules originally proposed during Gary Gensler’s tenure as chair. Grewal’s reaction mirrors the general relief across the crypto community, which had criticised the proposals as too rigid and potentially damaging to innovation.
Down goes 3b16, qualified custodian, and all the other unfinished Gensler rule proposals. @secgov just issued final notices rescinding them all.
— paulgrewal.eth (@iampaulgrewal) June 12, 2025
The SEC made its decision public in a notice issued Thursday, stating it was withdrawing a batch of proposed rulemakings dating from March 2022 through November 2023. The agency confirmed it has no current plans to reintroduce these measures.
Custody Obligations Pulled Back
Also abandoned was a proposal from March 2023 that would have reshaped how investment advisers manage and store client assets. The rule had aimed to extend existing custody requirements to explicitly include digital assets. If enforced, it would have required advisers to work only with “qualified custodians,” typically regulated banks or brokerage firms.
The concern was that most crypto service providers would not meet this definition. That would have placed advisers in a bind—either change service partners or exit crypto entirely. The proposed rule fell under the broader Safeguarding Advisory Client Assets initiative and was framed to apply across all asset classes, though it was seen as especially impactful for crypto.
This proposal, too, was reviewed earlier this year at the request of Uyeda. With its formal withdrawal, advisers have been spared from an immediate need to change how they handle digital assets.
Additional Rules Also Scrapped
Alongside the crypto-specific proposals, the SEC cancelled several others, reflecting a comprehensive rollback of pending rules. One such rule dealt with cybersecurity risk controls for investment funds and advisers, an area that had implications for firms managing digital asset portfolios or custodial services.
Another rescinded proposal would have required greater transparency from large holders of security-based swaps, including those engaged in crypto derivatives. This was aimed at increasing market visibility but has now been shelved.
The regulator also dropped a high-profile plan to mandate enhanced environmental, social, and governance (ESG) reporting for publicly listed companies. That measure, intended to promote greater corporate transparency, has been paused in line with the broader regulatory unwind.
Image 2: (Source: CNA)
Broader Regulatory Intent
While the crypto industry may interpret this as a victory, the withdrawals reflect more than a change in digital asset oversight. They represent a clear political and policy shift under the Trump administration toward reducing regulatory pressure across markets. Trump’s platform has consistently advocated for deregulation as a way to support business growth and innovation.
For now, the SEC’s posture suggests a softer stance on crypto enforcement, at least in terms of rulemaking. However, this does not mean digital assets are beyond reach. The agency retains broad authority to act through enforcement, even as formal rule proposals are scaled back.
What happens next will depend heavily on future market developments and political outcomes. A change in leadership or regulatory philosophy could revive many of these withdrawn proposals in new forms.
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Still, the current direction has offered temporary breathing space to an industry that had braced for heavier oversight. Whether that space allows for more mature dialogue between regulators and the crypto community remains to be seen.
