SEC Withdraws Controversial DeFi Rules Impacting Ethereum and Crypto Custody Regulations

The U.S. Securities and Exchange Commission (SEC) has officially withdrawn multiple regulatory proposals targeting decentralized finance (DeFi) and cryptocurrency custody, as reported by COINOTAG on June 13. These proposals, initially introduced under former Chairman Gary Gensler’s tenure, aimed to enhance regulatory oversight through a “regulation by enforcement” strategy. Notably, the SEC retracted the proposed amendment to Rule 3b-16 of the Securities Exchange Act, which sought to expand the definition of an exchange to include DeFi platforms. This move was intended to subject decentralized finance entities to the same regulatory framework as national securities exchanges. However, the proposal encountered significant opposition from industry participants who argued it could stifle innovation and complicate compliance. The SEC’s decision to withdraw these rules reflects a cautious approach to regulating emerging crypto technologies while balancing investor protection and market development.