The U.S. Securities and Exchange Commission (SEC) has withdrawn over a dozen proposed rules, including two key crypto-related proposals from the Biden administration, marking a significant shift in federal regulatory policy under President Donald Trump.
Key Crypto Rules Withdrawn
Among the 14 rules rescinded are:
- Rule 3b-16, which would have expanded the definition of an “exchange” to include decentralized finance (DeFi) protocols.
- The crypto custody rule, which would have imposed stricter requirements on investment advisers managing digital assets.
In a statement on Thursday, the SEC said it was “withdrawing certain notices of proposed rulemaking” issued between March 2022 and November 2023. The agency clarified that it “does not intend to issue final rules” based on those proposals, though future rulemaking may revisit similar areas.
“Down goes 3b-16, qualified custodian, and all the other unfinished Gensler rule proposals,” Coinbase Chief Legal Officer Paul Grewal noted on X.
What Was Rule 3b-16?
The amendment to Rule 3b-16 under the Exchange Act sought to redefine “exchange” to include non-traditional platforms and DeFi protocols, even those using only communication protocols to match buyers and sellers.
This expansive interpretation risked classifying DeFi systems as securities exchanges, exposing them to SEC registration and compliance requirements. Crypto industry leaders warned that such a move would stifle innovation and force decentralized platforms into regulatory gray zones.
Crypto Custody Proposal Also Axed
The SEC also pulled its proposed Safeguarding Advisory Client Assets rule, which would have tightened custody rules for investment firms holding digital assets.
The rule aimed to mandate that all client assets, including crypto, be held by a “qualified custodian,” such as regulated banks or broker-dealers—a requirement most crypto platforms do not meet. Critics argued the proposal would exclude most crypto exchanges and wallet providers, significantly disrupting digital asset advisory services.
Trump Administration Signals Regulatory Reset
This repeal is the latest move in President Trump’s broader push for deregulation of both crypto and traditional financial markets. With the withdrawal of these proposals, the path appears clearer for industry-led innovation—though regulatory uncertainty remains.
Investors and developers now await fresh guidance under a pro-crypto administration, with new rules likely to follow a more innovation-friendly approach.