SEC Rolls Back Crypto Oversight from Biden-Gensler Era
The US Securities and Exchange Commission (SEC) has formally rescinded a series of proposed rules introduced during the Biden administration, including two that would have significantly impacted crypto custody practices and decentralised finance (DeFi) platforms.
In a notice issued Thursday, the agency announced it is “withdrawing certain notices of proposed rulemaking” dating back to March 2022 and stated it does not intend to finalise these proposals.
Should its stance change, the SEC said it would introduce new rulemakings in the future.
This move aligns with President Donald Trump’s broader deregulatory push, which includes efforts to scale back oversight in both crypto and traditional financial markets.
Coinbase chief legal officer Paul Grewal posted on X (formerly known as Twitter):
“Down goes 3b16, qualified custodian, and all the other unfinished Gensler rule proposals.”
Down goes 3b16, qualified custodian, and all the other unfinished Gensler rule proposals. @secgov just issued final notices rescinding them all.
— paulgrewal.eth (@iampaulgrewal) June 12, 2025
Notably, among the 14 proposals withdrawn was a controversial amendment to Rule 3b-16, which sought to broaden the definition of “exchange” under the Securities Exchange Act.
The amendment would have classified many DeFi protocols as securities exchanges by including systems that facilitate communication and trading interest between buyers and sellers.
Originally proposed under then-acting Chair Mark Uyeda, the rule had faced significant industry pushback for its sweeping implications.
Its withdrawal now signals a potential shift in how federal regulators approach oversight of digital assets.
The SEC is officially withdrawing dozens of proposed rules issued between March 2022 and November 2023 including key policies from the Gensler era.
Notably dropped:
• The expanded Custody Rule
• Rule 3b-16 redefining DeFi exchanges
• Enhanced ESG disclosure requirements
The… pic.twitter.com/5960j8Zveq
— Bitcoin.com News (@BTCTN) June 13, 2025
Rules That Have Been Rescinded
The SEC has also withdrawn a proposed rule from March 2023 that would have significantly tightened custody requirements for crypto assets.
Known as the Safeguarding Advisory Client Assets rule, the proposal aimed to expand the Custody Rule under the Investment Advisers Act of 1940 to cover a broader range of client assets—including digital ones.
Though framed to apply universally, the rule carried major implications for the crypto industry by requiring investment advisers to store assets with “qualified custodians,” typically regulated banks or broker-dealers.
This posed a serious challenge for most crypto exchanges and wallet providers, which generally do not meet the SEC’s definition of a qualified custodian.
Had the rule gone into effect, many advisers might have been forced to switch custodians or exit the crypto space entirely.
In March, Commissioner Mark Uyeda had already urged staff to reconsider the proposal’s future.
In addition to scrapping the custody rule, the SEC also withdrew several other proposals with relevance to digital assets.
These included rules on cybersecurity risk management and reporting for investment advisers and funds—both of which could have imposed new compliance burdens on crypto fund managers and custodians.
Also withdrawn was a rule requiring position reporting for large security-based swaps, which might have affected firms with significant crypto derivatives exposure.
Lastly, the agency reversed its push for stricter ESG reporting requirements for public companies, marking another step back from the regulatory agenda pursued under the Biden administration.
