The U.S. Securities and Exchange Commission (SEC) is considering withdrawing the Biden-era crypto custody rule, according to the acting chairman. This potential policy shift could reshape the regulatory landscape for digital asset custodians, signaling a more flexible approach to crypto oversight.
Speaking on March 17 at an investment business conference in San Diego, Uyeda underlined general industry worries about the rule’s extensive reach. Originally presented under the Biden administration in February 2023, the measure sought to increase custody rules for financial advisers covering all client assets, including digital currency. It also aimed to tighten security policies to safeguard those assets.
Uyeda admitted that the large comments from business leaders were major obstacles to implementing the law in its present form moving forward. “Considering such issues, there could be significant challenges carrying out the original idea,” he said. “I have asked the SEC staff to evaluate possible alternatives, including the possibility of withdrawing the ruleand closely working with the crypto task force.”
Originally proposed under the direction of former SEC Chair Gary Gensler, the idea aimed to stop investment advisers from depending on crypto platforms as qualified custodians. Gensler contended that these systems run in ways that fall short of required security and compliance criteria. Uyeda, Commissioner Hester Peirce, and other trade associations fiercely objected, saying the rule was unworkable and could hinder innovation.
Uyeda’s reservations about the plan were not fresh. He used to wonder how investment counselors could obey the rules and yet participate in crypto asset investments. Though he disagreed with some of the clauses, Uyeda first supported presenting the proposal despite his misgivings.
The sole commissioner to vote against the regulation, Peirce, cautioned that it would increase regulatory control on crypto assets while simultaneously lowering the number of companies allowed to act as qualified custodians.
Uyeda’s most recent comments coincide with his recent demand for alternatives to abandon another legislative project mandating some cryptocurrency firms to register as exchanges. Under the Trump administration, the SEC also eliminated a rule requiring financial institutions possessing cryptocurrencies to show them as liabilities on their balance sheets.
The SEC’s leadership change is in progress concurrently. Former President Donald Trump nominated former SEC Commissioner Paul Atkins in December, with the expectation that he will succeed Uyeda as Chair. Atkins apparently has a Senate confirmation hearing set for March 27.
Under Uyeda’s direction, the possible reversal of the crypto custody rule shows a larger change in regulatory priorities with an emphasis on juggling investor safety with regulatory efficiency. Industry players will closely monitor the SEC’s next actions on crypto rules even if the ultimate rule decision is yet unknown.
