🛑 SEC Scraps Gensler-Era Crypto Crackdown — A Regulatory Reset Begins

DeFi protocols, custody rules, and open-source devs just dodged a regulatory bullet. The SEC is pulling back — and crypto finally catches a break.

⚖️ Key Rules Withdrawn — What’s Off the Table?

The SEC just withdrew multiple high-impact proposals that would have reshaped how DeFi and digital assets are regulated in the U.S. These proposals were central to Gary Gensler’s tenure as SEC Chair and drew widespread backlash from the crypto community and lawmakers alike.

Among the now-shelved rules:

• ❌ A proposed amendment to Rule 3b-16, redefining “securities exchange” to include DeFi protocols and smart contracts
• ❌ A rule requiring advisors to use only qualified custodians (banks, trust companies) for crypto holdings
• ❌ Rules enhancing cybersecurity and ESG disclosures for investment firms (not crypto-specific, but part of the regulatory overreach debate)

The message? The SEC is reconsidering its "regulation-by-enforcement" strategy.

🧨 Congressional Blowback and Gensler’s Exit

During recent hearings, bipartisan lawmakers torched the SEC’s crypto approach, accusing Gensler of being unclear, overaggressive, and ineffective.

🔥 Rep. Tom Emmer even shouted at Gensler, calling him an "incompetent cop" who chased crypto talent offshore — and into the arms of China.

Lawmakers slammed the SEC for:

• Offering no registration path for DeFi platforms
• Failing to stop offshore players like Binance and Tether
• Creating legal limbo for U.S. crypto companies

🌀 The Ethereum Elephant: Still No Clarity

Gensler repeatedly dodged questions about whether Ethereum is a security. He hinted that Proof-of-Stake tokens might fall under SEC control, but never clarified ETH’s status post-Merge.

That ambiguity has been a huge thorn for:

• Ethereum developers
• Blockchain lawyers
• Institutional players seeking clear guidance

💥 FTX Fallout — And SEC’s Missed Shot

Lawmakers grilled Gensler over FTX’s collapse, questioning why the SEC didn’t act sooner despite red flags.

Gensler’s answer? "If they had registered, we could’ve stopped them."

Industry response: That’s the problem. There’s no clear way to register.

🔄 New Chair, New Direction?

Gary Gensler is out. Paul Atkins is in.

And with him comes a new tone:

• ✅ Support for decentralized custody
• ✅ Pledge to engage with crypto in good faith
• ✅ Desire to rethink the framework from the ground up

Paradigm, a leading crypto policy group, welcomed the reset:

"The only way forward is to start over — with dialogue and transparency."

✍️ TL;DR

• The SEC just withdrew Gensler-era proposals targeting DeFi and crypto custody
• Congress and the crypto industry pushed back hard against vague and heavy-handed rules
• Ethereum’s legal status? Still murky
• Gensler is out, Atkins is in — and a new regulatory strategy is taking shape

A much-needed course correction might finally be underway.