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The U.S. Securities and Exchange Commission’s recent withdrawal of multiple Gensler-era proposed rules marks a pivotal moment for the crypto industry, easing regulatory pressures that previously stifled innovation.
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This regulatory rollback includes the removal of controversial measures such as Exchange Act Rule 3b-16 and the crypto custody rule, which had drawn widespread criticism from crypto executives and legislators alike.
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Coinbase CLO Paul Grewal praised the SEC’s decision on social media, emphasizing the significance of discarding these stringent proposals that targeted DeFi platforms and crypto custody practices.
SEC withdraws key Gensler-era crypto rules, signaling regulatory relief and renewed innovation opportunities for DeFi and digital asset sectors in the U.S.
SEC Withdraws Gensler-Era Proposed Rules, Easing Regulatory Burdens on Crypto Industry
The U.S. Securities and Exchange Commission (SEC) has officially withdrawn 14 proposed rules introduced between March 2022 and November 2023 under former Chair Gary Gensler. This decisive action addresses long-standing concerns from the crypto sector regarding regulatory overreach. Notably, the withdrawal includes Exchange Act Rule 3b-16, which sought to classify decentralized finance (DeFi) platforms as exchanges, and the crypto custody rule that mandated investment assets be held by regulated custodians. These proposals had been widely criticized for imposing restrictive frameworks that hindered the growth and operational flexibility of crypto businesses, many of which faced banking challenges as a result.
Industry Leaders Applaud SEC’s Regulatory Shift and Call for Tailored Crypto Frameworks
Prominent voices within the crypto ecosystem have welcomed the SEC’s move as a positive step toward fostering innovation. Coinbase Chief Legal Officer Paul Grewal publicly commended the withdrawal, highlighting the removal of burdensome rules that threatened DeFi and custody operations. Similarly, Bill Hughes, Director of Global Regulatory Matters at ConsenSys, expressed relief, noting the regulatory rollback “feels good” for the industry. ConsenSys founder Joe Lubin has long advocated for distinct regulatory approaches that recognize the unique characteristics of digital assets compared to traditional securities, underscoring the need for frameworks that support rather than stifle technological advancement.
SEC’s Evolving Approach: From Enforcement to Engagement with Crypto Stakeholders
Under Acting SEC Chair Mark T. Uyeda, the agency has signaled a strategic pivot from aggressive enforcement toward constructive engagement with the crypto community. Uyeda acknowledged the friction caused by prior regulatory stances that treated most cryptocurrencies as securities, emphasizing the importance of developing clear, pragmatic rules to guide the industry. The SEC Crypto Task Force has since focused on creating regulatory clarity, issuing frameworks and guidelines aimed at balancing investor protection with innovation. This shift is further evidenced by the agency’s decision to drop several high-profile enforcement actions against major crypto firms including Binance and Ripple, reflecting a more measured regulatory posture.
Implications for the U.S. Crypto Market and Future Regulatory Landscape
The withdrawal of Gensler-era proposals is expected to reduce uncertainty and operational constraints for crypto businesses operating in the United States. By removing contentious rules that many viewed as ill-suited for the decentralized nature of digital assets, the SEC is paving the way for a more innovation-friendly environment. This regulatory recalibration may encourage increased investment and development within the DeFi sector and broader crypto ecosystem. However, the agency continues to emphasize the need for comprehensive, tailored regulations that protect investors while enabling technological progress, signaling ongoing dialogue and potential future rulemaking efforts.
Conclusion
The SEC’s decision to rescind several Gensler-era proposed rules represents a significant regulatory milestone for the cryptocurrency industry. This move alleviates key compliance challenges and signals a shift toward more balanced governance that recognizes the distinct nature of digital assets. While challenges remain, the evolving regulatory landscape offers renewed optimism for innovation and growth within the U.S. crypto market. Stakeholders are encouraged to stay informed and engaged as the SEC continues to refine its approach to digital asset regulation.
