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Jul 15, 2025
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The U.S. securities regulator, SEC, has withdrawn several high-profile regulations planned under the Biden Administration, two of which were aimed at digital asset exchanges and custody. This action represents a significant regulatory change as President Trump's administration engages in the widespread deregulation of markets.
SEC confirmed on Thursday that it has withdrawn more than a dozen rule proposals from March 2022 to November 2023. Among the most notable is the reversal of Rule 3b-16, which aimed to expand the definition of an “exchange” to include decentralized finance (DeFi) protocols.
This proposal would have forced most DeFi systems and platforms where investors trade digital assets to fall under the same regulations as conventional securities exchanges. The expansive terms of the rule caused alarm in the crypto sector, because it had the potential to define most blockchain protocols as securities exchanges, which would bring significant regulation.
Coinbase’s Chief Legal Officer, Paul Grewal, commented on X that this marks the end of “unfinished Gensler rule proposals,” referencing Gary Gensler, the SEC’s former chair and architect of the initiatives.
In addition to the exchange definition rollback, the SEC rescinded a separate rule that would have tightened crypto custody requirements for investment advisers. The initial Safeguarding Advisory Client Assets rule, proposed in March 2023, would have applied custody requirements to all client assets, including those in the crypto markets.
Had it gone into effect, the rule would have required investment advisers to utilize “qualified custodians” to hold digital assets, which are often regulated banks or broker-dealers. Many existing crypto platforms fail to comply with such standards, which raises concerns that investment firms would be forced to either change providers or exit crypto markets entirely.
This proposed rule drew criticism from both the digital asset industry and some SEC commissioners. In March, then-acting Chair Mark Uyeda requested staff to consider withdrawing the proposal, citing concerns about its impact and enforceability.
The SEC’s announcement also confirmed the withdrawal of rules impacting cybersecurity risk management and large derivatives reporting. These measures would have affected crypto funds, asset managers, and firms exposed to digital asset derivatives.
The regulator said it does not intend to complete these repealed proposals, and it could reconsider its approach with changes in the regulatory environment. In the meantime, crypto exchanges, DeFi protocols, and investment advisers are relieved of stricter regulation under these withdrawn rules, which is a defining instance in the U.S. crypto policy landscape.
