In a surprising turn of events, a proposed rule change that required certain crypto firms to register as exchanges may be abandoned following remarks by acting Chairman of the U.S. Securities and Exchange Commission (SEC), Mark Uyeda. This development comes on the heels of significant public backlash against the rule’s expansive definition of exchange, which would increase regulation on alternative trading systems (ATSs) within the crypto industry.
During his speech at the Washington Conference of the Institute of International Bankers on March 10, Uyeda stated, “In light of the significant negative public comment received on the definition of exchange with respect to crypto, I have asked SEC staff for options on abandoning that part of the proposal.” He criticized the previous administration’s approach, suggesting it unnecessarily intertwined the regulation of Treasury markets with an overly aggressive stance toward the cryptocurrency space.
Originally, the rule was designed in 2020 under former SEC Chairman Jay Clayton, aiming to provide clearer regulations mainly for U.S. Treasury market participants. However, the subsequent administration, led by Gary Gensler, took a markedly different path. Gensler expanded the regulator’s purview and proposed a new rule in 2022 that significantly broadened the definition of an exchange, capturing various protocols involved with crypto assets.
Gensler’s tenure was marked by a vigorous regulatory environment, where over 100 enforcement actions were initiated against firms, culminating in his resignation on January 20, 2023. The SEC’s stance has since softened, showing a newfound willingness to dismiss cases against several firms, including recent announcements regarding Gemini, Kraken, and Cumberland DRW.
Furthermore, the SEC has established a crypto task force led by Commissioner Hester Peirce, aimed at developing a comprehensive framework for digital assets. This conciliatory approach raises important questions about how the SEC plans to navigate the evolving landscape of cryptocurrency regulation while fostering industry growth and innovation.
As the SEC reevaluates its stance, it remains crucial to strike a balance between necessary oversight and promoting a healthy market environment for crypto enterprises. The forthcoming changes to regulatory measures could pave the way for a more stable and transparent future for the rapidly evolving crypto sector.
