Acting Chair Mark Uyeda Moves to Strip Crypto Rules From Long-Delayed Trading Platform Regulation. The U.S. Securities and Exchange Commission (SEC) is backtracking on a contentious proposal to classify crypto platforms as regulated exchanges, signalling a shift in its regulatory strategy.
Acting Chair Mark Uyeda announced plans to remove digital asset provisions from a sweeping rule initially designed to expand oversight of trading venues. The move follows intense criticism from crypto firms and lawmakers who argued the rule overstepped the SEC’s authority.
Uyeda Seeks to Scrap Crypto Rules
Uyeda directed agency staff to draft options for scrapping the crypto-specific language, according to prepared remarks for a Monday speech. “Linking Treasury market reforms with crypto regulation was a mistake,” he stated, addressing the Institute of International Bankers.
“Public feedback overwhelmingly opposed this approach, and we must listen.” The proposal, first introduced in 2022, aimed to redefine “exchange” to include platforms using “communication protocols” for crypto trades. Critics warned it would stifle innovation and burden firms with impractical compliance demands.
Industry Pushes Back Against Regulatory Overreach
Crypto leaders applauded Uyeda’s pivot, calling it a win for clarity. Meanwhile, the SEC’s earlier proposal faced fierce backlash for conflating Treasury market reforms with digital asset oversight. Companies argued the rule’s vague language could classify decentralised protocols or even chat rooms as regulated exchanges. “The SEC tried to shoehorn crypto into a framework built for stocks,” said a blockchain advocacy group spokesperson. “This reversal acknowledges that distinction.”
Republican lawmakers and industry groups had urged the SEC to abandon the provision, citing jurisdictional overreach. Notably, the proposal emerged under former Democratic Chair Gary Gensler, whose aggressive crypto enforcement drew bipartisan scrutiny. Since Uyeda’s interim appointment, the agency has paused multiple crypto-related lawsuits and launched a task force to reassess its digital asset strategy.
Gensler’s Legacy Faces Republican-Led Overhaul
The SEC’s retreat marks a stark departure from Gensler’s tenure, which prioritised reining in crypto markets through existing securities laws. His administration proposed over 20 rules targeting digital assets, including the contested exchange definition. However, Uyeda’s latest move aligns with Republican efforts to curtail what they call “regulation by enforcement.”
President Donald Trump’s appointees have steadily chipped away at Gensler’s policies since January. For instance, the SEC recently dismissed cases against several crypto firms and delayed decisions on Bitcoin ETF applications. Additionally, Uyeda urged staff to reengage with the Treasury Department and Federal Reserve on narrower reforms for government securities trading systems, which is a nod to bipartisan concerns about bond market liquidity.
What’s Next for Crypto Regulation?
Legal experts warn the SEC’s reversal could create regulatory gaps unless Congress steps in. “Without clear rules, crypto firms remain in limbo,” said a financial law professor. “The industry needs tailored legislation, not fragmented agency actions.” Meanwhile, the SEC’s 2022 proposal remains in limbo, with no timeline for finalisation.
Uyeda emphasised collaboration with other agencies to address crypto risks without stifling growth. His remarks also hinted at potential compromises, such as exempting decentralised platforms from exchange rules. Nevertheless, Democrats caution that easing oversight could expose investors to fraud. “Rolling back protections isn’t the answer,” argued Senator Elizabeth Warren. “We need stronger enforcement, not less.”
