SEC Acting Chair Signals Potential Rollback of Proposed Crypto Custody Rule
The U.S. Securities and Exchange Commission (SEC) is reconsidering a contentious proposal aimed at tightening cryptocurrency custody requirements, the latest indication of a shifting regulatory landscape for digital assets under the new Trump administration, according to a report in The Block on Monday.
Speaking at the Investment Company Institute's 2025 Investment Management Conference in San Diego, Acting Chair Mark Uyeda stated that the proposal, introduced in February 2023 under the previous Biden administration and then-SEC Chair Gary Gensler, has drawn considerable criticism. The rule would have expanded the existing custody rule for registered investment advisers to encompass any client assets under their control, specifically targeting cryptocurrencies and requiring them to be held with qualified custodians meeting certain standards.
"Given such concern, there may be significant challenges to proceeding with the original proposal," Uyeda said, signaling a potential retreat from the previous administration's approach. "As such, I have asked the SEC staff to work closely with the crypto task force to consider appropriate alternatives."
The proposed rule aimed to extend the current custody regulations, which require registered investment advisers to maintain client assets with qualified custodians like banks or broker-dealers, to the cryptocurrency sector. This raised concerns within the industry about potentially limiting the number of banks willing to engage with crypto firms.
The proposal faced strong opposition from Congressional Republicans, cryptocurrency companies, and traditional financial institutions when it was initially introduced. A coalition of banking and financial industry associations, including the American Bankers Association, warned that the rule "could have a material impact on their business."
Uyeda's move to revisit the crypto custody rule marks the second instance this month where he has asked SEC staff to reconsider existing or proposed regulations. Last week, he directed a review of a proposed rule change that could have broadened the definition of an "exchange" to potentially include decentralized crypto projects.
These actions underscore a notable shift in the SEC's direction following the change in administration. During the Biden era, former Chair Gensler maintained that most cryptocurrencies, with the exception of Bitcoin, should be classified as securities.
Since the Trump administration took office, the SEC has moved swiftly to alter its stance on several key crypto policies. Within a few short weeks, the agency has rescinded controversial crypto accounting guidance, dropped enforcement actions against major players in the crypto industry, established a dedicated crypto task force, and even issued a statement regarding memecoins. The newly formed crypto task force is scheduled to hold its first roundtable discussion this Friday, focusing on the complex issue of "defining security status" for digital assets.