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20/02/25
16
SEC Withdraws Appeal on Controversial Crypto Rule, Signaling Shift in Regulation
The US Securities and Exchange Commission (SEC) has officially withdrawn its efforts to overturn a court decision that blocked a contentious broker-dealer rule aimed at expanding the agency’s oversight to decentralized cryptocurrency protocols. In a recent filing to the Fifth Circuit Appeals Court, the SEC indicated its intention to voluntarily dismiss the appeal, which has not faced opposition.
The decision follows a significant ruling issued by a Texas federal court last November, which was prompted by a lawsuit from the Blockchain Association and the Crypto Freedom Alliance of Texas. The court ruled against the SEC’s proposed changes to its definition of a dealer, which would have required crypto liquidity providers and automated market makers with capital exceeding $50 million to register with the agency. The crypto advocacy groups contended that the proposed rule would impose impractical and unenforceable requirements on decentralized finance (DeFi) protocols, many of which lack a centralized authority capable of meeting Know Your Customer and Anti-Money Laundering regulations.
Judge Reed O’Connor of the Texas District Court determined that the SEC had overstepped its statutory authority by attempting to implement such a broad definition of a dealer. The dismissal of the SEC’s appeal effectively concludes the legal dispute initiated by industry advocates in April 2024, marking a pivotal moment for the cryptocurrency sector.
In tandem with this development, there have been shifts within the SEC itself following the departure of former Chair Gary Gensler. The agency’s current leadership, under acting chair Mark Uyeda, is reportedly shifting its focus toward rolling back prior enforcement efforts related to cryptocurrencies. A Crypto Task Force has been established, led by Commissioner Hester Peirce, aimed at developing a regulatory framework for digital assets. The task force is expected to review ongoing litigation against crypto firms initiated under Gensler’s tenure.
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