SEC Considers Abandoning Effort to Regulate Crypto Firms as Exchanges

The U.S. Securities and Exchange Commission (SEC) may abandon its push to classify crypto firms as exchanges under new regulatory proposals. In a recent speech, Acting SEC Chairman Mark Uyeda revealed that he had directed SEC staff to explore options for halting a proposed rule change that would expand the definition of alternative trading systems (ATSs) to include crypto companies.

Uyeda’s remarks, delivered on March 10 at the Washington Conference of the Institute of International Bankers, came in response to significant public opposition to the proposal. The proposed rule, which initially aimed to tighten oversight of U.S. Treasury markets, had been broadened during Gary Gensler's tenure as SEC Chairman to encompass crypto assets, a move that Uyeda described as a misstep.

"In light of the significant negative public comment received on the definition of exchange with respect to crypto, I have asked SEC staff for options on abandoning that part of the proposal," Uyeda said during his speech.

The rule change was originally drafted in 2020 under former SEC Chairman Jay Clayton’s leadership. The intention at that time was to clarify the regulatory framework for alternative trading systems, focusing primarily on participants in the U.S. Treasury market. However, under Gensler’s leadership, the proposal evolved to include a far broader definition of an "exchange," one that would include various communication protocols used in crypto markets. This shift was aimed at bringing crypto firms into the same regulatory framework as traditional exchanges, but Uyeda argues that it was a "heavy-handed" approach to the rapidly growing sector.

“The new definition of the term exchange included communications protocols without clearly defining what that term meant,” Uyeda explained. "Effectively, the vastly expanded definition of an exchange would have picked up various protocols used with respect to crypto assets."

Critics of the proposal argue that it would have significantly stifled innovation in the crypto industry by subjecting it to overly strict and broad regulations. Uyeda echoed this sentiment, suggesting that the SEC’s attempt to regulate crypto alongside traditional markets like Treasury securities was misguided and not reflective of the unique nature of digital assets.

During Gensler's tenure, the SEC took a notably aggressive stance on crypto regulation, bringing more than 100 enforcement actions against crypto firms from 2021 until his resignation in January 2025. However, the tone at the SEC appears to have shifted under Uyeda’s leadership. In recent months, several firms, including crypto exchanges like Gemini and Kraken, have had their cases dismissed, signaling a potential shift toward a more lenient regulatory approach.

Additionally, the SEC has established a dedicated crypto task force aimed at developing a clearer framework for digital assets, under the leadership of Commissioner Hester Peirce, who is known for her more crypto-friendly stance.

As the SEC reevaluates its approach to crypto regulation, the industry is closely watching the agency’s next steps. If Uyeda's proposal to abandon the rule change moves forward, it could signal a more balanced approach to regulating the rapidly evolving crypto space—one that aims to protect investors while fostering innovation.