SEC Scraps Proposed Crypto Regulations in Broad Biden-Era Rollback

In a sweeping move, the U.S. Securities and Exchange Commission (SEC) has formally withdrawn more than a dozen proposed rules introduced under the Biden administration—two of which directly targeted the cryptocurrency sector. The decision marks a significant shift in the regulatory climate, particularly for decentralized finance (DeFi) and digital asset custody.

SEC.gov | Rulemaking Activity

U.S. Securities and Exchange Commission

The SEC announced on Thursday that it is rescinding various rule proposals issued between March 2022 and November 2023, a period when Gary Gensler served as Chair. The agency clarified that it does not plan to finalize any of the withdrawn proposals and may revisit them with new drafts in the future if it opts to pursue similar regulatory goals.

Among the most notable repeals are changes to Rule 3b-16 under the Exchange Act, which would have expanded the definition of a securities exchange to potentially include many DeFi platforms. The rule proposed including systems that use non-firm trading interests and communication protocols to bring together buyers and sellers—language that risked pulling decentralized protocols under traditional securities regulation.

Also scrapped was the proposed Safeguarding Advisory Client Assets rule. Originally introduced in March 2023, this rule aimed to tighten custody requirements for investment advisers, extending them to cover all client assets, including crypto. If enacted, it would have required advisers to store digital assets with "qualified custodians," such as regulated banks or broker-dealers—a designation that most crypto exchanges and wallet providers do not meet. The change could have forced major structural adjustments or even led some firms to leave the space entirely.

Paul Grewal, Chief Legal Officer at Coinbase, highlighted the rollbacks on social media, noting that the end of proposals like 3b-16 marked a notable shift away from Gensler’s regulatory agenda.

Other withdrawn proposals include rules related to cybersecurity risk management for investment funds, enhanced reporting for large security-based swap positions, and ESG disclosures for public companies. Each of these had potential implications for the digital assets industry, especially funds managing crypto exposure or integrating ESG metrics into investment strategies.

The move comes under the broader deregulatory push from the Trump administration, which has signaled a friendlier stance toward crypto and traditional markets alike. While the SEC emphasized that future rules could still be proposed, the rollback suggests a reset in how digital assets might be treated by federal regulators in the near term.