SEC may abandon crypto exchange registration proposal after backlash

Acting SEC Chairman Mark Uyeda announced on March 10 that the U.S. Securities and Exchange Commission (SEC) is considering abandoning a proposed rule that would require certain crypto firms to register as exchanges.

Speaking at the Washington Conference of the Institute of International Bankers, Uyeda cited significant public criticism as a key factor behind this potential policy reversal.

The rule, initially introduced in 2020 under former SEC Chair Jay Clayton, aimed to streamline regulations for alternative trading systems (ATSs), primarily impacting U.S. Treasury market participants.

However, under former Chair Gary Gensler in 2022, the proposal was expanded to redefine "exchange" in a way that included various crypto-related protocols.

“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,” Uyeda criticised this approach.

The expanded definition included "communication protocols" without clear guidelines, raising concerns about overreach and ambiguity.

Uyeda has directed SEC staff to explore options for removing the crypto-specific provisions from the rule and collaborate with other agencies, such as the Treasury Department and Federal Reserve, to reassess its scope.

This announcement reflects a broader shift in the SEC's stance on cryptocurrency regulation since Gensler’s resignation in January 2025.

Under Uyeda’s leadership, the SEC has adopted a more conciliatory approach toward the crypto industry.

Several high-profile cases against firms like Gemini, Kraken, and Cumberland DRW have been dismissed in recent weeks.

Additionally, Commissioner Hester Peirce now leads a new crypto task force focused on developing a clear regulatory framework for digital assets.

The SEC’s reconsideration of this rule signals an effort to balance oversight with innovation in the rapidly evolving crypto sector.

Industry stakeholders have welcomed this shift but remain cautious about how future policies will address key issues like securities classification and compliance requirements.

“In light of significant negative public comment... we need to rethink our approach to ensure it aligns with market realities and fosters growth,” Uyeda stated.