Trump's SEC Signals End to Crypto Crackdown, Scraps 14 Rules

A New Regulatory Philosophy Emerges

This wave of withdrawals, announced by the SEC, encompasses proposals issued between March 2022 and November 2023. The agency has stated it "does not intend to issue final rules with respect to these proposals," indicating a clear pivot from Gensler's "regulation by enforcement" strategy. This change aligns with the new administration's stated commitment to sweeping deregulation across both traditional and crypto markets. Coinbase's Chief Legal Officer, Paul Grewal, noted on X (formerly Twitter) the implications of these withdrawals, stating, "Down goes 3b16, qualified custodian, and all the other unfinished Gensler rule proposals."

Impact on DeFi and Custody Standards

Among the most impactful rules rescinded is Rule 3b-16, which would have broadened the definition of "exchange" to potentially include many DeFi protocols, subjecting them to more stringent securities regulations. Another significant withdrawal is the proposed Safeguarding Advisory Client Assets rule from March 2023, which sought to expand custody requirements for digital assets, likely forcing many crypto exchanges and wallet providers to fall under a "qualified custodian" definition they currently don't meet. These changes are expected to alleviate significant regulatory burdens on crypto firms.

Broader Implications for the Crypto Industry

The move by the SEC signifies a more industry-friendly approach to digital asset oversight. Beyond crypto-specific rules, the SEC also revoked proposals concerning cybersecurity risk management for investment advisers and funds, and enhanced ESG (environmental, social, and governance) reporting requirements for public companies. This comprehensive rollback indicates a strategic effort to foster innovation by reducing regulatory hurdles, potentially ushering in a new era of growth and clarity for the cryptocurrency market in the United States.