SEC’s Uyeda Signals Possible Revisions to Crypto Custody Rule

SEC May Reconsider Controversial Crypto Custody Proposal

The United States Securities and Exchange Commission (SEC) may revise or abandon the controversial proposal by former chair Gary Gensler to tighten crypto custody standards for investment advisors.

Under Gensler’s two-year-old proposal, the SEC sought to expand federal custody rules to include assets like crypto, requiring investment advisors to hold client assets with qualified custodians, such as federal- or state-chartered banks.

SEC Chief Acknowledges Concerns

At an investment conference in San Diego on Monday, acting SEC chair Mark Uyeda acknowledged “significant concerns” raised by industry commenters over the “broad scope” of Gensler’s proposal.

“Given such concern, there may be significant challenges to proceeding with the original proposal,” Uyeda said.

Exploring Alternatives

The regulator mentioned he had directed the SEC staff to work with the agency’s crypto task force to explore alternatives, including withdrawing the rule altogether.

A Shift in Regulatory Approach

The former SEC chair’s leadership was defined by stringent crypto oversight, but his resignation before Trump took office marked a pivot in the SEC’s regulatory direction.

The SEC’s stance on crypto has shifted considerably under President Donald Trump’s leadership, with a more lenient and collaborative approach replacing the hostile regulatory posture of the Biden administration.

Reconsidering Controversial Regulations

With Uyeda now at the helm, the SEC is reconsidering several major policies from Gensler’s era, including contentious crypto regulations, which led to a lawsuit by 18 states before his departure.

The changes include rethinking the expanded definition of “exchanges” and halting the enforcement of certain rules that targeted crypto firms.

Key Developments

The SEC under Trump also revoked the Staff Accounting Bulletin (SAB) 121 rule that required firms holding crypto assets to record them as liabilities on their balance sheets.

The regulator has since dropped enforcement actions against major crypto firms, including Binance, Kraken, and Coinbase, among others, signaling a major relief from the taxing legal battles and uncertainty that plagued the industry for the past few years.

Crypto Task Force

In line with the Trump administration’s approach to crypto regulation, a significant crypto initiative was the formation of a dedicated crypto task force led by Commissioner ‘Crypto Mom’ Hester Peirce.

The task force is tasked with working closely with the crypto industry, with its inaugural roundtable, “How We Got Here and How We Get Out – Defining Security Status,” scheduled to be held this Friday.