SEC Officially Abandons Gensler’s DeFi and Custody Rule Initiatives

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The Securities and Exchange Commission (SEC) has formally withdrawn two key rule proposals from the Gary Gensler era that targeted crypto markets, per notices published Thursday.

The first, introduced in April 2023, aimed to expand the definition of an “exchange” under Rule 3b-16, potentially bringing decentralized finance (DeFi) platforms under SEC oversight. The proposal faced backlash from industry participants who argued it was overly broad.

The second rescinded rule would have tightened custody requirements for investment advisors dealing in crypto, mandating the use of qualified custodians—a move critics warned could further alienate traditional banks from the sector.

Policy analysts at Paradigm had previously urged the SEC to restart the rulemaking process with clearer guidelines and industry input.