TLDR
- The acting head of SEC, Mark Uyeda, has indicated that his staff should explore the possibility of repealing a crypto custody regulation suggested in 2023.
- According to this regulation, investment advisers are required to use authorized custodians to safeguard clients' crypto holdings.
- Those within the industry have voiced strong opposition to the broad nature of this proposed regulation.
- This decision underscores the SEC's ongoing revaluation of former crypto directives from the Trump era.
- The initiative illustrates a sustained evolution in the SEC's methodology to digital currencies during the Trump administration's influence.
Mark Uyeda, the interim Chair of the Securities and Exchange Commission, has tasked his team with the examination of withdrawing a rule proposal aimed at strengthening crypto custody requisites for investment advisers. This development marks another phase in SEC's evolving framework for regulating digital assets under the Trump administration.
Originally presented in February 2023 when Gary Gensler led the SEC, this rule targeted expanding custody rules to cover all client assets, cryptocurrencies included.
The proposal stated that investment advisers need to use state or federally sanctioned banks and broker-dealers as qualified custodians for crypto assets.
Gensler had stated It was suggested that investment advisers should refrain from depending on cryptocurrency platforms as they lack the necessary operational capabilities for qualified custody, causing disagreement in the industry and among certain SEC officials.
At a March 17 conference in San Diego focused on investment, Uyeda recognized the backlash and explained that critics found the proposal's reach too extensive.
Uyeda mentioned in his address that given these concerns, pursuing the initial proposal might present challenges and instructed SEC staff to explore alternative actions, including its possible repeal.
The response from industry players and regulatory changes.
Initially, the proposed rule encountered pushback from within and outside the SEC. Commissioner Hester Peirce, colloquially known as 'Crypto Mom' due to her supportive stance toward the crypto sector, was the lone dissenter voting against the rule.
Peirce warned that the proposal intended to increase custody requirements for crypto assets could reduce the pool of available custodians, a sentiment shared by industry advocate groups.
Additionally, Uyeda noted his own doubts at that juncture, questioning how advisers could comply with the rule without compromising investment in crypto for their clients.
Acting Chairman Mark T. Uyeda delivered a prominent talk at the ICI's Investment Management Conference. https://t.co/W6sYt92mGb pic.twitter.com/zBdKIJNHNF
— U.S. Securities and Exchange Commission (@SECGov) March 17, 2025
The banking sector also raised alarms, with a coalition comprising the American Bankers Association and other financial bodies cautioning that the proposal might significantly impact their businesses.
This marks the second instance this month where Uyeda has instructed the SEC staff to reassess regulations introduced under the earlier administration. Recently, he also sought options to 'abandon' certain aspects of a proposal enforcing many crypto firms to register as exchanges.
The current actions illustrate a broader transition in the SEC's regulatory strategy towards cryptocurrencies that surfaced during the Trump administration. There's a noticeable departure from Gensler's firm position, which deemed most cryptocurrencies aside from Bitcoin as securities.
In a flurry of recent regulatory shifts, the SEC has reversed several pivotal crypto policies, including rescinding the contentious SAB 121, an accounting directive that required firms holding crypto assets to list them as liabilities.
Significantly, the agency has halted legal efforts against key players in the cryptocurrency realm, such as Binance, Kraken, and Coinbase, which had embroiled the industry in lengthy legal conflicts and uncertainty.
Among the significant measures under the Trump era is the constitution of a special crypto taskforce led by Commissioner Peirce, dedicated to collaborating with industry experts to cultivate pragmatic regulatory frameworks.
The taskforce is set for its inaugural symposium titled 'How We Got Here and How We Get Out – Defining Security Status' this upcoming Friday, providing potential insights into the SEC’s shifting stance on crypto regulations.
In a twist of appointments, President Donald Trump nominated Paul Atkins, an ex-Commissioner, to succeed Uyeda as the agency’s permanent chair, with Senate hearings for Atkins scheduled for March 27.
Should the crypto custody rule be repealed, it could be a relief to investment advisers and the broader crypto realm, as many feared it deterred banking partners from engaging with the sector.
Republicans in Congress, in alliance with crypto and traditional finance entities, opposed the rule at its introduction, contending that the stringent conditions would stifle innovation within the industry.
In his recent address, Uyeda paid particular attention to the SEC's process for rulecrafting, exploring decisions to rescind or re-propose regulations and extending compliance timelines for certain rules.
This strategy marks a notable shift from Gensler’s regime known for fervent crypto oversight, with Gensler's resignation ahead of Trump’s presidency marking a pivotal transition in the overall regulatory trajectory.
As the SEC continuously recalibrates its regulatory approach towards cryptocurrencies, the crypto industry remains vigilant, anticipating what other policies from Gensler’s era might be reconsidered or discarded.
