The U.S. Securities and Exchange Commission (SEC) has formally withdrawn several regulatory proposals targeting decentralized finance (DeFi) and cryptocurrency custody practices.
Among the withdrawn measures was a proposed amendment to Rule 3b-16, which had sought to significantly broaden the definition of an ‘exchange’ to encompass DeFi platforms. This expansion would have subjected DeFi protocols to traditional exchange registration requirements.
The proposals faced substantial criticism from industry participants who argued the rules were overly broad and potentially unworkable for decentralized technologies. Critics contended the regulations risked stifling innovation and creating significant compliance burdens.
The SEC’s decision to withdraw these proposals reflects a cautious approach to regulating emerging crypto technologies. It signals an effort to balance investor protection objectives with fostering market development and acknowledging industry concerns.