SEC Abandons Genslers DeFi Regulation Initiatives

The U.S. Securities and Exchange Commission (SEC) has officially withdrawn proposed regulations related to the DeFi sector and cryptocurrency custody that were put forward by former chairman Gary Gensler. This information has been reported by The Block.

One of the rejected initiatives includes a proposal to amend rule 3b-16 of the Exchange Act, which was introduced in April 2023. This proposal sought to broaden the definition of «exchange» to apply «traditional» regulations to decentralized platforms, an initiative that faced criticism from industry representatives.

Additionally, the SEC has revoked a proposal that imposed stricter requirements for cryptocurrency custody. This proposal would have mandated investment advisors to utilize only qualified custodians and included additional protective measures. There were concerns in the industry that this might result in a reduction of banks willing to engage with digital assets.

Other rescinded initiatives included stricter cybersecurity requirements and the disclosure of ESG practice information for investment firms.

Gensler led the SEC from 2021 until early 2025. His approach of «regulation through enforcement» was often met with widespread criticism and contributed to uncertainty in the crypto industry.

Recently, current SEC chairman Paul Atkins announced a new direction for the agency regarding non-custodial storage of cryptocurrencies, describing this right as a «fundamental American value.»