TLDR
- SEC has withdrawn over a dozen proposed rules from the Biden administration, including two major crypto-related regulations
- Rule 3b-16 that would have expanded exchange definitions to include DeFi protocols has been rescinded
- Crypto custody rule requiring “qualified custodians” for all client assets has been killed
- The withdrawals are part of President Trump’s broader deregulation agenda for crypto and traditional markets
- SEC stated it does not intend to issue final rules on these withdrawn proposals
The US Securities and Exchange Commission has withdrawn over a dozen proposed rules from the Biden administration. The move includes two major crypto-related regulations that would have impacted DeFi protocols and digital asset custody requirements.
The SEC announced Thursday it was withdrawing certain notices of proposed rulemaking issued between March 2022 and November 2023. These rules were proposed under former Chair Gary Gensler’s leadership during the Biden administration.
The agency stated it does not intend to issue final rules on these withdrawn proposals. New rules will only be proposed if the SEC changes its stance in future regulatory actions.
The withdrawal represents part of President Trump’s broader regulatory rollback agenda. Trump has promised sweeping deregulation of both crypto and traditional financial markets since taking office.
Coinbase chief legal officer Paul Grewal celebrated the news on social media. He posted that Rule 3b-16, qualified custodian requirements, and other unfinished Gensler proposals were now dead.
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
Exchange Definition Rule Eliminated
Among the 14 withdrawn rules was Rule 3b-16, which would have expanded the definition of “exchange.” The rule targeted decentralized finance protocols and would have tightened crypto custody standards for investment advisers.
The amendment would have defined exchange systems to include those offering non-firm trading interest and communication protocols. This broad definition could have brought many DeFi protocols under securities exchange regulations.
The SEC first published proposed amendments to Rule 3b-16 in March 2022. The rule aimed to expand alternative trading system definitions to include crypto firms.
Acting SEC Chair Mark Uyeda had previously proposed abandoning this rule change in March. The withdrawal eliminates potential regulatory burdens on DeFi protocols that could have been classified as securities exchanges.
Crypto Custody Requirements Scrapped
The SEC also eliminated a rule proposed in March 2023 that would have increased custody requirements for crypto assets. The Safeguarding Advisory Client Assets rule would have expanded existing custody rules under the Investment Advisers Act of 1940.
The rule was framed to apply to all client assets but had particular implications for crypto. It aimed to bring digital assets more explicitly under SEC custody requirements through qualified custodian mandates.
Investment firms would have been required to hold all client assets, including crypto, with qualified custodians. These typically meant regulated banks or broker-dealers rather than crypto-native providers.
Most crypto exchanges and wallet providers did not meet qualified custodian definitions. This could have forced advisers to change providers or exit the crypto space entirely.
Uyeda had asked his staff in March to consider withdrawing the proposed crypto custody rule. The formal withdrawal removes this potential barrier to crypto investment advisory services.
The SEC also withdrew cybersecurity risk management rules for investment advisers and funds. These rules had implications for crypto fund managers and digital asset custodians.
A position reporting rule for large security-based swaps was also rescinded. This rule potentially affected entities with large crypto derivatives exposures.
The regulator additionally revoked its proposal requiring enhanced ESG reporting for public companies. The withdrawal covers environmental, social, and governance reporting requirements that had faced industry pushback.
