The US Securities and Exchange Commission has rescinded a slate of rules the agency proposed under the Biden Administration, including two relating to crypto custody and exchanges.
The SEC said on Thursday that it was “withdrawing certain notices of proposed rulemaking” that were issued between March 2022 and November 2023 under former Chair Gary Gensler.
The agency added that it “does not intend to issue final rules with respect to these proposals,” and new rules will be proposed should it change its stance in future regulatory action.
It’s President Donald Trump’s latest regulatory rollback, which has promised sweeping deregulation of crypto and traditional markets.
“Down goes 3b16, qualified custodian, and all the other unfinished Gensler rule proposals,” Coinbase chief legal officer Paul Grewal posted to X.
Source: Paul Grewal
Exchange definition rule nullified
Among the 14 rules withdrawn by the SEC was Rule 3b-16, which would have expanded the definition of “exchange” to include decentralized finance protocols and tightened crypto custody standards for investment advisers.
The amendment defined certain terms used in the definition of “exchange” to include “systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities.”
The broad statement could have seen many decentralized finance (DeFi) protocols categorized as securities exchanges.
The SEC first published proposed amendments to Rule 3b-16 under the Exchange Act in March 2022.
Then-acting SEC chair Mark Uyeda proposed abandoning the rule change to expand the definition of “alternative trading systems” to include crypto firms in March.
Crypto custody rule rescinded
The SEC also killed a rule proposed in March 2023 that would have upped custody requirements for crypto.
The SEC’s proposed Safeguarding Advisory Client Assets rule would have expanded existing Custody Rules under the Investment Advisers Act of 1940. It was broadly framed to apply to all client assets, but was particularly significant for crypto as it aimed to bring digital assets more explicitly under SEC custody requirements.
Investment firms would be required to hold all client assets, including crypto, with a “qualified custodian,” which typically meant regulated banks or broker-dealers.
Most crypto exchanges and wallet providers did not meet the definition of “qualified custodians,” which could have forced advisers to change providers or exit the space.
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In March, Uyeda asked his staff to look at possibly withdrawing the proposed crypto custody rule.
🚨 LATEST: The SEC officially withdraws multiple regulatory proposals including the expanded Custody Rule, Rule 3b-16 for DeFi exchanges, and enhanced ESG reporting requirements from the Gensler era. pic.twitter.com/V0jO3FKk8h
— Cointelegraph (@Cointelegraph) June 13, 2025
Other rules rescinded
Other rules withdrawn by the regulator included cybersecurity risk management and reporting rules for investment advisers and funds, which had implications for crypto fund managers and digital asset custodians.
A rule for position reporting for large security-based swaps, potentially affecting entities with large crypto derivatives exposures, was also withdrawn.
The regulator also revoked its proposal to make public companies comply with enhanced ESG (environmental, social, and governance) reporting requirements.
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