On June 13, the SEC withdrew three controversial proposals, sending a significant signal to the crypto industry and DeFi. This article delves into the details of these proposals and their possible implications.
What Was the 'Expanded Custody Rule'?
The Expanded Custody Rule proposed that all investment advisers must entrust client assets, including crypto assets, to 'qualified custodians.' This dramatically expanded the definition of 'custody,' including nearly all client assets and imposing high thresholds for being recognized as 'qualified custodians.' This faced backlash from the crypto industry as many startups found themselves unable to comply.
Rule 3b-16: SEC's Ambition to Regulate DeFi
Rule 3b-16 sought to include DeFi platforms and smart contracts under the SEC's oversight, equating them to traditional securities exchanges. This raised significant concerns within the crypto community, as it introduced potential legal liabilities for developers. The withdrawal of this proposal indicates a change in the regulators' approach to crypto regulation.
Implications of These Withdrawals for the Crypto Industry
The withdrawal of these proposals may reopen avenues for DeFi developers, allowing them to rethink compliance strategies. For investors, this could mean more access to investment channels and easier approvals for new products. For regulators, this is an opportunity to adjust their approach and reduce strict oversight on innovators in the cryptocurrency space.
While the SEC's proposal withdrawals offer promising prospects for the crypto industry, it is crucial to remain aware of ongoing challenges surrounding compliance and user protection. Regulators are starting to recognize that cryptocurrencies are an essential part of the financial infrastructure of the future.
