As regulators pivot under new leadership, the Securities and Exchange Commission appears ready to abandon a contentious crypto custody rule that has plagued the industry for over a year. Acting SEC Chair Mark Uyeda has directed staff to reconsider the February 2023 proposal, citing “significant concerns” from commenters about its sweeping scope.
The rule, a hallmark of the Biden administration’s crypto crackdown, would have forced investment advisers to store digital assets with qualified custodians. Sounds reasonable, right? Not according to the crypto industry and their Republican allies in Congress, who fought it tooth and nail.
Uyeda’s move marks the second time he’s pumped the brakes on Gensler-era regulations. He previously ordered a review of the “exchange” definition rule that would have expanded oversight to include crypto firms operating as communication protocols. Guess the new sheriff isn’t keen on his predecessor’s handiwork.
Acting Chair Uyeda continues dismantling Gensler’s legacy, showing little appetite for his predecessor’s aggressive regulatory agenda.
The industry is practically doing backflips over the potential rollback. They’ve complained for months that the rule would limit banking partnerships and strangle operations. Now they’re seeing light at the end of the regulatory tunnel.
This shift couldn’t align more perfectly with the incoming Trump administration’s pro-crypto stance. It’s a sharp U-turn from Gensler’s position that most cryptocurrencies are securities needing strict oversight. The former chair never met a crypto regulation he didn’t like.
The implications could be huge. Compliance burdens might ease. More banks could jump into the crypto custody game. Institutional players might finally stop clutching their pearls about regulatory uncertainty.
What’s next? SEC staff will work with the crypto task force on alternatives – including potentially killing the rule entirely. The industry is holding its breath for the official word.
For crypto enthusiasts who’ve spent years battling what they view as regulatory overreach, this feels like winning a battle in a long war. But the regulatory landscape remains unsettled.
One thing’s certain – the SEC’s approach to crypto is changing, and fast. A coalition of banking associations had previously warned about material business impacts if the proposal were implemented as originally designed. The rule had raised concerns about digital asset security, as many investors prefer using cold wallets for long-term cryptocurrency storage rather than custodial solutions.
