- SEC revokes proposed Rule 3b-16 expansion targeting DeFi protocols, easing registration burden and clarifying exchange classification onchain platforms.
- Custody proposal forcing advisers to use only qualified custodians has been withdrawn, restoring access to crypto asset safekeeping.
The U.S. Securities and Exchange Commission has withdrawn several draft rules aimed at decentralized finance platforms and crypto custody requirements, marking a sharp shift under new leadership.
The proposals, introduced under former Chair Gary Gensler, would have broadened the definition of “exchange” under Rule 3b-16 of the Exchange Act to include many DeFi protocols. They also would have forced investment advisers to use only qualified custodians for crypto assets.
The Rule 3b-16 change drew criticism from industry experts, including Paradigm researchers, who argued that effective regulation demands clear dialogue with technology developers. They warned that tagging DeFi platforms as exchanges without technical input risked confusion and stifled growth.
Meanwhile, the custody proposal threatened to disqualify established crypto custodians. Investment advisers would have lost access to many existing banks and trust companies, creating hurdles for asset managers and their clients. The draft rule was paused in March 2025 by then–interim Chair Mark Uyeda amid pushback that it sacrificed innovation for consumer protection.
With Paul Atkins now serving as SEC Chair, the agency has adopted a more collaborative posture. Atkins has publicly affirmed that individuals hold a fundamental right to control their digital assets. Under his direction, the SEC has signaled a willingness to align oversight with the unique features of blockchain protocols and global market practices.
This regulatory retreat coincides with the Trump administration’s pro-crypto stance. The White House has urged agencies to avoid overly rigid rules that could drive innovation overseas. In recent weeks, the SEC also dropped enforcement actions against several crypto firms, moving away from the “regulation by penalty” model favored under the previous chair.
ETHNews analysts say the agency’s new approach could lead to more technical rulemaking and proportionate oversight. They expect future proposals to emerge only after extensive public consultation and targeted impact studies.
For now, the industry gains room to develop DeFi protocols and custody solutions without the threat of broad, one-size-fits-all rules.
