The U.S. Securities and Exchange Commission (SEC) is now considering dropping its plan to classify certain crypto firms as exchanges. Acting SEC Chairman Mark Uyeda recently shared this update, which could significantly impact the crypto industry. During his speech at the Washington Conference of the Institute of International Bankers on Monday, Uyeda explained the decision and the reasoning behind it.
Uyeda revealed that he had asked SEC staff to explore options for removing parts of the proposed rule changes. These changes initially sought to broaden the definition of “alternative trading systems” (ATSs) to include crypto exchanges. If approved, the rules would have imposed stricter regulations on crypto firms operating as exchanges. However, the SEC received strong public opposition to this definition, prompting Uyeda to reconsider the proposal.
He admitted that the previous proposal was overly broad and problematic. “In my view, it was a mistake for the Commission to link regulation of Treasury markets with a heavy-handed attempt to clamp down on the crypto market,” Uyeda stated. This shift in direction came after Gary Gensler’s resignation as the SEC Chairman. Uyeda, along with former SEC Commissioner Paul Atkins, has been seen as more crypto-friendly compared to Gensler, who had pushed for stricter enforcement of crypto regulations.
Initially, the SEC introduced the proposal in 2020 under former Chairman Jay Clayton. However, under Gensler’s leadership in 2022, the SEC expanded the proposal to include crypto firms under the ATS framework. This change would have subjected crypto firms to increased regulatory scrutiny and additional compliance requirements. Many in the industry expressed concerns that the proposal’s broad language would encompass a wide range of crypto protocols without clearly defining key terms, creating unnecessary uncertainty.
Recently, the SEC has already started reversing some enforcement actions from Gensler’s tenure. The agency dropped lawsuits against major crypto firms like Coinbase and Kraken. Additionally, the SEC paused proceedings against Binance, signaling a more flexible approach toward crypto regulation.
To summarize, the SEC’s reconsideration of its stance on regulating crypto exchanges marks a potential shift in the agency’s approach. With ongoing debates surrounding crypto regulation, this change could have significant implications for the industry.
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