US SEC To Review Proposed Crypto Custody Rule Amid New Rulemaking Approach

The US Securities and Exchange Commission (SEC) acting chair revealed that the agency is reviewing its rulemaking process and will revisit a controversial rule on crypto custody requirements for investment advisers proposed during the Biden administration.

Crypto Custody Rule Proposal Could Be Abandoned

At the Investment Company Institute’s 2025 Investment Management Conference, SEC’s acting chair, Mark Uyeda, discussed the regulatory agency’s new approach to rulemaking. During the Monday conference, he affirmed that the Commission’s blueprint must prioritize “effective and cost-efficient regulations that respect the limits of our statutory authority.”

As a result, the SEC could work on a “back to basics” framework for its rulemaking process. Under this framework, the agency could consider withdrawing or re-proposing existing rule proposals, as some, including the 2023 crypto custody rule, raise various concerns.

On February 2023, the Commission, led by Gary Gensler, voted to pass a proposal to make amendments to the 2009 Custody Rule, which would “expand and enhance the role of qualified custodians when registered investment advisers custody assets on behalf of investors,” stated the former SEC chair.

Under the 2009 rule, registered investment advisers must hold their client assets with a qualified custodian, like a bank or broker-dealer. The proposed amendment would expand the custody rule to include virtually any asset, including crypto, which raised several concerns among industry players.

At the time, Uyeda stated, “This approach to custody appears to mask a policy decision to block access to crypto as an asset class. It deviates from the Commission’s long-standing position of neutrality on the merits of investments.”

On Monday, The SEC’s acting chair revealed that “there may be significant challenges to proceeding with the original proposal.” Based on this, he asked the regulatory agency’s staff to “work closely with the Crypto Task Force to consider the appropriate alternatives, including its withdrawal.”

He also affirmed that the Commission could consider extending or delaying compliance dates for some recently adopted rules.

US SEC Returning To A ‘Smoother’ Regulatory Approach

Uyeda criticized the past administration’s approach to rulemaking and regulatory changes, asserting that these “were not for the better.” Moreover, he added that the “rulemaking shortcuts” have “returned to haunt the Commission in subsequent litigation.”

Turning to future rulemaking, the Commission should act like a super-sized freighter, not a speed boat – and that means returning to a smoother regulatory course than the rapid changes that have been promulgated over the last four years. Investors and the industry must be able to rely on us to act consistent with precedent and through an informed and thorough public process.

Uyeda concluded that the Commission needs to “take the time to do things carefully and methodically, rather than rush and risk actions that are not fully thought through.”

The acting chair’s remarks follow the ongoing changes in the SEC’s approach to the crypto industry under the Trump administration. Over the past two months, the Commission has paused, closed, or dismissed most of its key crypto processes, including the lawsuits and open investigations against Binance, Coinbase, Kraken, and Robinhood.

As reported by Bitcoinist, the SEC allegedly has been taking action to stop “rogue attacks” on the industry by requiring top-level approval to launch investigations and scaling back on its crypto enforcement unit.

Additionally, SEC Commissioner Hester Peirce, known for her crypto-friendly approach, has revealed that the regulatory agency will start to establish “pieces” of its new framework this year.