The U.S. Securities and Exchange Commission (SEC) is stirring debate with plans to dismantle a contentious Biden-era crypto custody proposal. Acting Chair Mark Uyeda recently hinted at reversing stricter safeguards, sparking speculation about a softer stance toward digital assets. Industry players now await a potential overhaul of compliance demands.
Key Players Shaping the Regulatory Debate
The SEC’s potential reversal pits policymakers against crypto advocates and financial institutions. Acting Chair Mark Uyeda leads the charge, advocating for revised rules amid pushback from investment advisors and firms.
Former SEC Chair Gary Gensler, architect of the original proposal, faces opposition from Trump-appointed officials. This includesincoming Chair Paul Atkins. Industry groups like the Investment Adviser Association have lobbied against the rule, arguing compliance costs could stop innovation. Still, crypto platforms and custodians remain divided. With some welcoming flexibility and others fearing reduced accountability.
The Biden-Era Rule: Stricter Safeguards, Heavier Burdens
In February 2023, the SEC proposed mandating registered advisors to store crypto assets with “qualified custodians” who meet rigorous financial and operational standards. The rule aimed to prevent fraud by ensuring third-party oversight, mirroring protections for traditional securities.
Advisors would also need enhanced record-keeping and audits. However, critics argued the requirements were too vague, applying even to non-custodial services like decentralised finance (DeFi). Many warned the rule’s broad language could force firms to abandon crypto offerings entirely.
Why the SEC is Hitting the Brakes?
Public backlash has driven the SEC’s reconsideration. Over 150 stakeholders, including banks and crypto firms, criticised the rule’s “unworkable” scope during the comment period. Uyeda acknowledged these concerns at a March 2025 San Diego conference, stating compliance complexities outweighed benefits.
The agency now explores alternatives, including scrapping the rule or narrowing its focus. Meanwhile, SEC staff will reassess custody definitions and exempt certain crypto activities. This pivot aligns with Trump-appointed leaders prioritising industry growth over stringent oversight.
Shifting Policies on ETFs and AI
The SEC is reviewing a 2023 rule requiring ETFs and mutual funds to report holdings monthly instead of quarterly. While designed for transparency, firms argue frequent disclosures could expose AI-driven trading strategies to competitors. Uyeda hinted at flexibility, stating the SEC seeks “balance” between accountability and innovation. These changes reflect a broader deregulatory trend, including reversed accounting guidelines for crypto firms and dropped enforcement cases. A new crypto task force will further reassess priorities under incoming leadership.
A New Era Under Paul Atkins Leadership
Former SEC Commissioner Paul Atkins, set to replace Uyeda, signals a pro-industry shift. Atkins, known for criticising overregulation, will likely accelerate rollbacks of Gensler-era policies. His appointment follows Trump’s pledge to foster fintech growth, contrasting Biden’s focus on investor safeguards.
Crypto advocates welcome the change, hoping for clearer guidelines and reduced legal risks. However, consumer groups warn lax rules could enable fraud in a $2 trillion market. The SEC’s task force faces pressure to draft pragmatic frameworks amid this ideological clash.
Balancing Act In A Divided Market
The SEC’s rethink underscores a global dilemma: Can regulators safeguard investors without hindering technological progress? Crypto firms argue rigid rules push innovation offshore, while regulators stress defaults like FTX justify oversight.
For now, the SEC’s potential retreat marks a turning point that could redefine crypto’s role in mainstream finance. Stakeholders on all sides now watch as the agency navigates this high-stakes balancing act.
As debates intensify, the SEC’s next move will shape not just crypto custody but the future of financial regulation itself.
