SEC Withdraws Proposed Rule to Classify DeFi Protocols as Securities Exchanges, Easing Regulatory Burden

The U.S. Securities and Exchange Commission (SEC) formally withdrew its proposed amendments to Exchange Act Rule 3b-16 on June 12, 2025, a move that would have classified decentralized finance (DeFi) protocols as securities exchanges. This decision marks a significant shift in the regulatory landscape for the burgeoning DeFi sector. The proposal, initially introduced in March 2022 under former SEC Chair Gary Gensler, aimed to broaden the definition of an "exchange" to encompass systems utilizing non-firm trading interest and communication protocols, thereby bringing many DeFi platforms under federal securities regulation.

The withdrawal is expected to bring immediate relief and clarity to the DeFi industry. As noted by CoinTracker Enterprise on social media, the decision means "Less regulatory ambiguity for DeFi holdings" and "Lower compliance burden for DeFi treasuries." Industry participants had voiced strong opposition to the proposed rule, arguing it was overly broad and failed to adequately consider the unique structure and operational mechanisms of decentralized protocols.

This specific withdrawal is part of a broader action by the SEC, which simultaneously rescinded 13 other proposed rules from the Gensler era. These included proposals related to crypto custody, cybersecurity risk management for investment firms, and ESG disclosures. The collective withdrawal signals a notable change in the agency's regulatory approach, moving away from the "regulation by enforcement" strategy that characterized the previous leadership.

Current SEC Chair Paul Atkins has indicated a shift towards a more collaborative and measured regulatory process. The decision to withdraw these proposals suggests the Commission may opt for new rulemakings in the future, but only after more thorough engagement with affected industries and a re-evaluation of potential impacts. This development is widely seen as a victory for crypto innovation and a step towards more accommodating regulatory guidelines for digital assets in the United States.