SEC looking to abandon effort requiring crypto firms to register as exchanges
A significant shift in the regulatory landscape for cryptocurrency may be on the horizon as the acting chairman of the U.S. Securities and Exchange Commission (SEC), Mark Uyeda, advocates for a reevaluation of a proposed rule change affecting digital asset firms. This proposed regulation aimed to categorize certain crypto operations as exchanges, thereby subjecting them to stringent oversight similar to that applied to traditional alternative trading systems (ATSs).
During a recent speech at the Washington Conference of the Institute of International Bankers, Uyeda indicated that he had requested the SEC staff to explore options for abandoning parts of the proposal specifically linked to the new definition of an exchange. He noted that substantial backlash from the public regarding the rule’s implications for crypto has prompted this reconsideration. Speaking candidly about the proposal’s complexities, Uyeda remarked, “In my view, it was a mistake for the commission to link together regulation of the Treasury markets with a heavy-handed attempt to tamp down the crypto market.”
Originally crafted in 2020 under former SEC Chairman Jay Clayton, the rule was intended to create clearer guidelines for ATSs, with a focus primarily on participants in the U.S. Treasury markets. However, the latter phase of development, under Gary Gensler’s leadership as SEC Chair, extended the rule’s reach beyond its original scope. Uyeda criticized this shift, emphasizing that the redefined term “exchange” included various communication protocols without providing clarity on what those entailed. This broadened definition risked capturing several protocols integral to the functioning of crypto assets.
Gensler’s tenure at the SEC was marked by an aggressive regulatory approach, leading to over 100 enforcement actions against cryptocurrency firms from 2021 until his resignation earlier this year. His time at the helm coincided with a politically charged environment, particularly as Donald Trump hinted at dismissal techniques for Gensler had he won the presidency again. Trump assumed office on January 20, the same day Gensler stepped down.
In the months following Gensler’s departure, the SEC appears to have adopted a more accommodating stance toward the crypto sector. Several high-profile cases against firms like Gemini and Kraken have been dismissed, signaling a potential shift in the regulator’s philosophy. The SEC’s recent reevaluation highlights a willingness to engage with the digital asset community rather than adopt a strictly punitive approach.
Furthermore, the SEC has initiated a dedicated crypto task force, led by commissioner Hester Peirce, aimed at formulating a comprehensive framework for the regulation of digital assets. This pivot from strict enforcement to a more collaborative strategy may serve to clarify unresolved issues in cryptocurrency regulation, fostering an environment where innovation can thrive amid the necessary oversight.
As the conversation around crypto regulation evolves, industry stakeholders will be watching closely to see how the SEC’s newly-friendlier approach and potential abandonment of the comprehensive exchange definition will shape the future of cryptocurrency enterprises in the U.S.
