SEC has rolled back Gensler's initiatives on DeFi

The U.S. Securities and Exchange Commission (SEC) has officially withdrawn the rules proposed by former agency head Gary Gensler regarding the DeFi sector and the custody of crypto assets. This was reported by The Block.

Among other things, the proposed amendments to Rule 3b-16 of the Securities Exchange Act, submitted in April 2023, were rejected. It aimed to expand the definition of "exchange" to extend "traditional" regulation to decentralized platforms. The initiative was met with criticism from industry representatives.

"The only way to develop a viable approach to regulating DeFi is to withdraw the proposed amendments and start from scratch: with a notice of rulemaking that clearly outlines the regulatory position after a real dialogue with the industry," experts from Paradigm stated at that time.

The project that strengthened the requirements for the storage of crypto assets has also been withdrawn. It required investment advisors to use only qualified custodians and included additional protective measures. There were concerns in the industry that this would lead to a reduction in the number of banks willing to work with digital assets.

Among other canceled initiatives are requirements for enhancing cybersecurity and disclosing information on ESG practices for investment companies.

Gensler has headed the SEC since 2021 until the beginning of 2025. His policy of "regulation through enforcement" often drew widespread criticism and created uncertainty for the crypto industry.

Let us remind you that the current head of the Commission, Paul Atkins, recently stated a new approach of the agency to non-custodial cryptocurrency storage. He called this right a "foundational American value."