SEC Reviews Crypto Custody Rule Amid Regulatory Shift
The United States Securities and Exchange Commission (SEC) is revisiting its regulatory processes, with a focus on potentially revising or withdrawing a controversial crypto custody rule initiated during the Biden administration. This move is part of a broader strategy to refine its regulatory approach, ensuring it aligns with statutory limitations and remains cost-efficient.
Reconsidering the Crypto Custody Rule
During the 2025 Investment Management Conference hosted by the Investment Company Institute, SEC’s acting chair, Mark Uyeda, elaborated on the agency’s evolving stance towards rulemaking. He highlighted the need for a return to “effective and cost-efficient regulations,” which respect the boundaries of the SEC’s authority.
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This shift could lead to a more fundamental approach to the rulemaking process. Consequently, the SEC is contemplating the withdrawal or reassessment of several existing proposals, including the contentious 2023 crypto custody rule. This rule, initially introduced in February 2023, proposed amendments to the 2009 Custody Rule, expanding the scope to include cryptocurrencies. The rule required registered investment advisers to use qualified custodians, such as banks or broker-dealers, for holding client assets, sparking substantial debate within the industry.
At that time, Uyeda remarked that this approach seemed to obscure a policy decision aimed at restricting access to cryptocurrencies as an asset class, diverging from the SEC’s traditional neutrality towards investment types. On Monday, Uyeda acknowledged the potential challenges of advancing with the original proposal and tasked the SEC staff to collaborate with the Crypto Task Force to explore viable alternatives, including the possibility of retracting the proposal. Additionally, the SEC might consider extending or postponing compliance timelines for several newly adopted regulations.
SEC’s Shift to a Steady Regulatory Path
Uyeda criticized the previous administration’s regulatory tactics, describing them as less than ideal. He argued that these “rulemaking shortcuts” have led to complications for the SEC in subsequent legal proceedings. Looking ahead, Uyeda advocated for a more deliberate and measured approach to rulemaking, akin to steering a large freighter rather than a swift speedboat. This entails transitioning to a more stable regulatory trajectory, contrasting with the rapid changes observed in recent years. He emphasized the importance of maintaining consistency with established precedents and conducting a comprehensive public process.
Uyeda concluded that the SEC must allocate time for careful and systematic actions, avoiding hasty decisions that could result in unforeseen consequences. His remarks coincide with the SEC’s evolving approach to cryptocurrency regulation, a shift that began under the Trump administration. Recently, the SEC has suspended, closed, or withdrawn numerous major crypto-related initiatives, including investigations and legal actions against Binance, Coinbase, Kraken, and Robinhood.
According to reports, the SEC is curbing “rogue attacks” on the crypto sector by mandating high-level approval for investigations and scaling back its crypto enforcement division. Moreover, SEC Commissioner Hester Peirce, known for her supportive stance on cryptocurrencies, announced plans for the agency to start constructing elements of its new regulatory framework within the year.
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