✅ Major Win for Crypto: SEC Withdraws Custody & DeFi Proposals
The U.S. SEC has officially dropped several controversial rule proposals, notably:
The “Expanded Custody Rule” (stronger demands on where investment advisors must store crypto)
Rule 3b‑16 (which would have classified many DeFi protocols as regulated exchanges) .
These proposals were part of a broader set of about 14 withdrawals from rules issued during the Gensler era (March 2022–Nov 2023). The SEC stated it does not intend to finalize those proposals .
🔍 Why It Matters
DeFi freedom: DeFi platforms avoid becoming classified as securities exchanges, which had threatened to stifle innovation .
Clearer custody framework: The rollback helps crypto custodians—exchanges, wallets—by avoiding forced reliance on banks or broker-dealers as “qualified custodians” .
Regulatory shift: The change aligns with a more crypto‑friendly approach under the current Trump administration, moving away from Gensler-era enforcement-heavy tactics .
⚠️ Still Watchful
Withdrawn proposals could be reintroduced later under different forms if policy objectives change .
A growing regime of FAQs, guidance, and task forces is emerging—crypto firms should stay engaged as requirements evolve .
🧭 Bottom Line
The SEC’s withdrawals represent a pivotal de‑escalation in crypto regulation, strategically reducing oversight over DeFi and custody. It’s a tactical win — easing innovation constraints — though long‑term regulatory direction is still unfolding.
