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A controversial rule that expanded the definition of exchanges to include crypto firms may be abandoned as U.S. Securities and Exchange Commission Acting Chairman Mark Uyeda calls for a reassessment.
The regulation in question is a 2020 rule originally designed to refine oversight of Alternative Trading Systems but was later broadened under former SEC Chair Gary Gensler to cover crypto platforms.
Speaking at the Institute of International Bankers’ Washington Conference on March 10, Uyeda said the rule’s expansion was a mistake and has asked SEC staff to explore dropping the crypto-related provisions.
Uyeda explained that the rule was initially meant to improve transparency and oversight of Government Securities ATSs, but the SEC under Gensler took it in a “very different direction.”
He pointed to the vague wording in the 2022 iteration of the rule, which included “communications protocols” without clearly defining the term. This, he argued, could have inadvertently subjected a wide range of crypto-related platforms to exchange regulations.
The revised rule, introduced under Gensler, could have forced certain crypto platforms to register as exchanges, even if they primarily operated as communication protocols or decentralized network
Uyeda said it was a “mistake” for the SEC to tie Treasury market regulations to what he described as a “heavy-handed attempt to tamp down the crypto market.”
Further, public feedback on the expanded definition of an exchange was overwhelmingly negative, according to Uyeda. As such, he has directed SEC staff to look into options for abandoning this part of the proposal while revisiting the original goal of regulating Government Securities ATSs.
Uyeda’s comments come as the agency has dropped several enforcement cases against crypto firms, including Gemini and Kraken, and has launched a new task force focused on developing clearer regulations for digital assets.
The agency appears to be reassessing several policies that previously put crypto in its crosshairs, rolling back measures introduced during Gensler’s tenure. Under his leadership, the SEC took an aggressive enforcement approach, launching over 100 enforcement cases against crypto firms.
As previously reported by crypto.news, the SEC has also stepped back in its broker-dealer rule case. On Feb. 20, the agency withdrew its appeal against a Texas court ruling that struck down the rule, which sought to classify certain DeFi platforms, liquidity providers, and market makers as dealers, subjecting them to registration requirements.
