SEC has decided to hit the brakes on a bunch of crypto regulations that were making waves under the Biden Administration. On Thursday, the SEC announced that it’s pulling back on several proposed rules, including those related to crypto custody and exchanges. These were all part of the Gensler-era rulemaking, but now they’re officially off the table.
So, what’s going on here? The SEC is basically saying, "Never mind" to these proposed rules issued between March 2022 and November 2023, and they’ve made it clear that they don’t intend to move forward with them anytime soon. If they ever change their mind, they’ll cook up new rules, but for now, things are taking a different direction.
This move is part of President Trump’s broader deregulation agenda, which is shaking things up in the crypto and traditional markets. As Coinbase’s chief legal officer, Paul Grewal, put it on X, “Down goes 3b16, qualified custodian, and all the other unfinished Gensler rule proposals.” Looks like the SEC’s crypto crackdown is going back to the drawing board.
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
SEC Scraps Rule That Could Have Changed DeFi Forever
Among the 14 withdrawn rules, one of the most notable is Rule 3b-16, which was poised to expand the definition of an “exchange” to include DeFi protocols. If this had gone through, decentralized finance systems could have been categorized as securities exchanges. That would’ve been a real game-changer, and likely would’ve impacted the entire DeFi space.
The amendment proposed in March 2022 aimed to broaden the scope of what constitutes an exchange, including systems that allow buyers and sellers to meet using non-firm trading interest and communication protocols. In short, it was looking to put a lot more of the DeFi ecosystem under the SEC’s radar. But now? It’s gone.
Crypto Custody Rule Also Gets the Axe
The SEC also pulled the plug on a crypto custody rule proposed in March 2023, which would’ve tightened custody requirements for crypto assets. This rule, called the Safeguarding Advisory Client Assets proposal, would have made it mandatory for investment firms to hold all client assets, including crypto, with a “qualified custodian.”
Here’s the kicker: most crypto exchanges and wallet providers don’t meet the definition of “qualified custodians”, typically regulated banks or broker-dealers. This would have forced many firms to either find a new provider or simply leave the crypto space altogether. But now? That potential headache has been avoided.
In addition to crypto-related rules, the SEC also pulled some other regulatory proposals, like cybersecurity risk management for investment advisers, position reporting for security-based swaps, and even a proposal that would’ve forced public companies to comply with stricter ESG (environmental, social, and governance) reporting rules. Seems like the SEC’s taking a major step back in terms of regulatory pressure across the board.
So, is this a sign that the SEC is backing off crypto, or just hitting the pause button? It’s hard to say, but one thing’s for sure: the landscape is shifting, and crypto might just be getting a breather.
Andrew Madison
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