The U.S. Securities and Exchange Commission (SEC) has officially withdrawn several controversial rules proposed during former Chair Gary Gensler’s tenure, aimed at stricter oversight of DeFi platforms and custody of crypto assets.
Withdrawal of SEC Proposed Rules
The SEC has officially withdrawn several rules that raised concerns within the crypto industry. A key proposal from April 2023 sought to broaden the definition of an exchange under Rule 3b-16. Had it been enacted, it would have subjected DeFi platforms to the same regulations as national securities exchanges.
Opposition from the Crypto Industry
The crypto industry opposed the proposed regulations. Paradigm experts emphasized that the SEC needs to return to the drawing board and consult directly with the DeFi community. Another proposed rule would have required investment advisors to custody crypto assets with qualified custodians, alarming the industry due to its potential to reduce the number of banks willing to deal with digital assets.
Changes in SEC Leadership
These proposals had already been put on hold in March 2025 by then-acting SEC Chair Mark Uyeda after facing heavy criticism. The commission has now formally withdrawn them. Other withdrawals included Gensler-era regulations on cybersecurity and ESG (Environmental, Social, and Governance) standards for investment companies. Gensler, who led the SEC from 2021 to January 2025, faced criticism for what many called regulation by enforcement, putting the crypto industry in a legal gray area.
The withdrawal of these rules reflects a shift in the SEC's policy following the election of pro-crypto President Donald Trump and a more accommodating stance toward DeFi under current Chair Paul Atkins. He noted that self-custody is an 'American value' that must extend to digital assets as well.
