SEC’s DeFi And Custody U-Turn Gets Nod From Coinbase
The U.S. Securities and Exchange Commission (SEC) has officially taken back a number of controversial proposals that were made when Gary Gensler was chair. One of the most important rules was regulation 3b-16, which tried to make decentralised finance (DeFi) platforms into securities exchanges.
Another important regulation was an enlarged custody rule that would have required all crypto assets to be kept by qualified custodians. This shows that the new leaders are taking a different approach to regulating digital assets. They want to work together and encourage fresh ideas.
People see the decision as part of a larger trend towards less regulation. Acting SEC Chair Paul Uyeda and newly appointed Chair Paul Atkins are leading the commission away from policies that rely on enforcement. Many people in the crypto industry think this retreat is a long time coming.
CLO of Coinbase Paul Grewal’s Answer
Paul Grewal, Coinbase’s Chief Legal Officer, openly commended the SEC’s choice to abandon these plans. Grewal went on social media to celebrate what he called a “huge victory for the crypto community,” saying:
“Down goes 3b-16, the qualified custodian, and all the other Gensler rule ideas that aren’t done yet. This is a gain for everyone who builds in the open, both developers and users.
Grewal has long spoken out against what he sees as the SEC going too far in its rules during the Gensler period. His answer shows that he is relieved and hopeful that the business will finally get clearer and better rules from the government.
Why These Rules Caused a Lot of Trouble
The SEC made Rule 3b-16 to modify the meaning of the word “exchange” so that DeFi protocols would fall under its authority. Critics said this would stop new ideas from coming out and have developers follow rules that weren’t meant for decentralised systems.
The Expanded Custody Rule, on the other hand, said that all client assets had to be kept by qualified custodians, which are companies that meet high financial and regulatory standards. If the rule had been finalised, a lot of crypto companies would not have met these requirements and would have had to spend a lot of money on restructuring or finding a way out.
These suggestions made things very unclear for blockchain developers, investors, and platforms, especially those making DeFi apps or providing custody services.
An Effect on The Whole Industry
This reversal isn’t happening by itself. The SEC is also changing its mind about other Gensler-era ideas, like those about ESG disclosures, swap oversight, and cybersecurity rules. The adjustment indicates a more welcoming approach to interacting with the crypto business instead of cracking down on it.
This means less regulatory pressure for Coinbase and other U.S.-based services, which is good for their growth. It also improves the legal environment while Coinbase continues to fight its own judicial fights with the SEC. The repeal of these guidelines could even impact the outcome of cases that are currently going on about how to classify cryptocurrencies and register exchanges.
What Comes Next
Leaders in the sector say that the rollback is a good start, but that more clarity is still needed. Now, both lawmakers and regulators are being asked to work towards creating broad laws that are specific to digital assets. The debate is changing, and the focus is moving from enforcement to collaboration. This means that the future of DeFi, custodianship, and the crypto ecosystem as a whole will be more balanced.