The SEC has officially withdrawn its proposed rules targeting decentralized finance (DeFi) and expanded custody regulations, signaling a shift in its regulatory stance. This move is widely seen as a response to strong industry resistance and may ease compliance pressures while fostering renewed dialogue with blockchain innovators.
The rollback comes amid internal debates within the Commission regarding how best to oversee the evolving DeFi landscape. The proposals, originally introduced under former Chair Gary Gensler, drew criticism for their potential impact on crypto custody practices and broader digital asset investment strategies.
SEC Commissioners Hester Peirce and Mark Uyeda openly opposed the now-withdrawn proposals, expressing concern that such measures risked undermining innovation. Uyeda emphasized the significance of careful control by saying:
“Earlier SEC actions against DeFi deterred business owners and lacked regulatory clarity. Excellent regulation requires time. The SEC should not abstain from supervising new fields just because doing so requires thinking beyond the box.”
Their remarks highlight a changing tone within the agency, with a broader regulatory reset potentially easing compliance burdens for investment advisors and widening access to crypto custodianship. The withdrawn rules had implications for key assets like ETH and BTC, sparking industry concern over transparency and accessibility.
The SEC’s move aligns with recommendations from the Paradigm Policy Team, which has consistently called for frameworks shaped through industry engagement rather than top-down enforcement. Previous efforts to regulate tokens like UNI and COMP underscore the market’s sensitivity to sweeping policy changes.
Early observations of on-chain financial data suggest that this withdrawal could improve market liquidity. As new custodial solutions emerge, the digital asset space may benefit from broader participation and increased institutional confidence.
