The U.S. Securities and Exchange Commission (SEC) abruptly repealed several proposed crypto rules on June 13, 2025, marking a significant turn in its regulatory approach.
The Axed Rules: DeFi, Custody, and Exchange Redefinitions
The SEC scrapped 14 proposed rules, including two with major implications for the crypto industry:
1. **Rule 3b-16**: This rule would have expanded the definition of 'exchange' to include DeFi protocols, requiring platforms facilitating token trades to register as securities exchanges. 2. **Enhanced Custody Rule**: This mandated investment advisers to hold client crypto assets only with SEC-approved custodians, sidelining crypto-native firms like Coinbase Custody.
Other repealed measures targeted security-based swaps and climate disclosures.
Reasons for Criticism: Overreach of Regulation
SEC documents reveal bipartisan concerns that the rules created vague, unworkable standards. Rule 3b-16’s 650-page proposal never explicitly mentioned 'DeFi' but implied that even Telegram groups coordinating token swaps could be regulated as exchanges.
Republican Commissioner Hester Peirce praised the repeal, stating: > 'These rules threatened to stifle innovation by punishing developers for writing code. The SEC isn’t Congress—we can’t legislate via enforcement.'
Democrats cautioned the rollback risks consumer harm but acknowledged the proposals lacked clear compliance guidance.
Industry Reactions: Cheers, Caution, and Strategic Shifts
The SEC’s rollback has sparked swift and varied reactions across the crypto landscape. Startups and venture investors celebrate what they see as a long-overdue win for innovation, anticipating a surge in DeFi projects and U.S.-based crypto launches.
However, the mood is more cautious among Wall Street banks and traditional asset managers, who quietly lament the loss of the custody rule. Legal scholars warn of 'policy whiplash,' arguing that such abrupt regulatory shifts create uncertainty for both investors and builders.
Marta Belcher of the Electronic Frontier Foundation stated: > 'This isn’t a free pass. DeFi builders still need to engage with regulators or risk future crackdowns.'
With the Biden-era rules gone, the U.S. crypto sector enters a new phase with a focus on more targeted guidelines, navigating both opportunities and regulatory challenges in the coming year.
