The U.S. Securities and Exchange Commission has officially scrapped a series of proposed rules introduced during the Biden administration, including two key measures targeting crypto custody and exchanges.
On Thursday, the SEC announced it was “withdrawing certain notices of proposed rulemaking” that were issued between March 2022 and November 2023 under then-Chair Gary Gensler.
The agency stated it has “no intention to issue final rules based on these proposals” and that any future changes in its regulatory approach would come through new proposals.
This move marks the latest in a broader deregulatory push under President Donald Trump, who has vowed to scale back oversight across both crypto and traditional financial markets.
“Down goes 3b16, qualified custodian, and all the other unfinished Gensler rule proposals,” wrote Coinbase Chief Legal Officer Paul Grewal in a post on X.
Exchange Definition Rule Repealed
Among the 14 proposed rules withdrawn by the SEC was Rule 3b-16, which aimed to broaden the definition of “exchange” to encompass decentralized finance (DeFi) protocols and impose stricter crypto custody requirements on investment advisers.
The proposed amendment sought to redefine key terms in the Exchange Act, including language that would cover “systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities.” This expansive wording could have led to many DeFi platforms being classified as securities exchanges.
The SEC initially introduced the proposed changes to Rule 3b-16 in March 2022.
In March of this year, then-acting SEC Commissioner Mark Uyeda recommended scrapping the amendment, which would have extended the definition of “alternative trading systems” to include crypto-related platforms.
Crypto Custody Regulation Withdrawn
The SEC has also withdrawn a rule proposed in March 2023 that sought to tighten custody requirements for crypto assets.
The proposed Safeguarding Advisory Client Assets rule aimed to expand the existing Custody Rules under the Investment Advisers Act of 1940. While the rule was broadly written to cover all client assets, it held particular significance for the crypto industry, as it would have explicitly brought digital assets under the SEC’s custody framework.
Under the proposal, investment advisers would have been required to store all client assets, including crypto, with a “qualified custodian” — typically regulated banks or broker-dealers.
However, most crypto exchanges and wallet providers did not meet that definition, potentially forcing advisers to switch custodians or pull back from crypto altogether.
In March, Commissioner Uyeda directed his staff to explore the possibility of withdrawing the proposed crypto custody rule.
Additional Rules Rolled Back
Among the other rules withdrawn by the SEC were proposed regulations on cybersecurity risk management and reporting for investment advisers and funds—measures that would have had direct implications for crypto fund managers and digital asset custodians.
The agency also scrapped a rule that would have required position reporting for large security-based swaps, a move that could have impacted firms with significant crypto derivatives exposure.
Additionally, the SEC pulled back a proposal that would have mandated enhanced ESG (environmental, social, and governance) disclosures for public companies.
