SEC Backs Away from DeFi Crackdown Amid Industry Opposition

U.S. regulators are reevaluating their stance on decentralized finance (DeFi) after Acting SEC Chair Mark Uyeda signaled plans to drop a controversial proposal.

The rule, originally designed to expand the definition of exchanges to include DeFi protocols, faced intense criticism from industry stakeholders who warned it could stifle innovation and impose impractical compliance requirements. Uyeda acknowledged these concerns and directed SEC staff to explore withdrawing the crypto-related portion of the proposal.

The proposed changes stemmed from modifications to Regulation ATS, which was initially introduced to regulate alternative trading systems. Under the previous SEC administration, the rule was revised to potentially classify DeFi platforms as regulated exchanges.

Critics argued this approach ignored the decentralized nature of these networks and could create significant legal and operational hurdles. Uyeda’s recent statement suggests a shift in regulatory priorities, as the agency reconsiders its oversight approach toward digital assets.

The decision follows broader regulatory shifts in the U.S., where the SEC has recently rolled back certain crypto-related policies. This includes rescinding strict accounting guidelines and dropping enforcement actions against industry players.

The agency’s evolving stance indicates a move toward a less restrictive regulatory environment for digital assets. Meanwhile, cooperation between the SEC and the Commodity Futures Trading Commission (CFTC) is expected to provide greater clarity on how cryptocurrencies will be regulated moving forward.