SEC’s Mark Uyeda Signals Reversal of Gensler’s Crypto Custody Rules: A Shift In Crypto Regulation!

Under Acting SEC Chair Mark Uyeda, the U.S. Securities and Exchange Commission (SEC) has declared plans to possibly revive or eliminate the crypto custody rule originally presented by Chairman Gary Gensler to the Biden administration. During his leadership, chair Mark Uyeda of the SEC displays possible regulatory changes for managing cryptocurrencies. The SEC showcases a major strategic transformation with the changing political climate under the executive influence of President Trump as it introduces a less restrictive policy towards digital assets.

Controversial Crypto Custody Rule: A Step Back for Investment Advisors

In his leadership of the SEC, Gensler introduced the crypto custody rule in 2023 to create more stringent regulations for crypto asset management by investment advisers. According to the proposed rule, investment advisers must maintain their client fund assets in qualified custodian institutions, including banks authorized by the state or federal government. The regulation aimed to protect consumers and secure digital assets through institution-based storage of digital assets complying with defined regulatory criteria. The proposed move from Gensler encountered powerful resistance from crypto industry members, financial companies, and members of the SEC staff.

During the 2025 Investment Management Conference in San Diego, Uyeda met with stakeholders who expressed their worries about how widely the rule was written. The crypto space faces potential difficulties as critics state that the rule would decrease the number of qualified custodians available, creating more complexity in crypto institution financial interactions. The SEC chief directed his staff to engage with their crypto task force team to develop different alternatives, including total rule withdrawal.

Uyeda’s Shift in Approach: Reconsidering Stricter Regulations

Uyeda establishes a review of the custody rule as an essential step toward implementing regulatory strategies that differ from those supported by Gensler and the Biden administration. During his tenure as SEC director, Gensler demonstrated an aggressive crypto regulatory position that fought major crypto companies through enforcement actions and numerous lawsuits. Under Uyeda’s leadership, the SEC now employs a more business-friendly direction. The SEC plans to redo existing guidelines that force mutual funds and exchange-traded funds (ETFs) to document their crypto assets monthly instead of quarterly periods.

Acting Chairman Mark T. Uyeda delivered keynote remarks at ICI’s Investment Management Conference today. https://t.co/W6sYt92mGb pic.twitter.com/zBdKIJNHNF

— U.S. Securities and Exchange Commission (@SECGov) March 17, 2025

Uyeda has emphasized during his statements that the SEC should develop rules that demonstrate both effectiveness and cost efficiency while staying within its established legal authority. The SEC requires regulations to protect investors, yet the agency must preserve crypto industry innovations beyond strict restrictions that hinder business operations. The new regulatory approach coincides with the Trump administration’s expectations to establish cooperative relationships between the crypto sector and public authorities instead of confrontational enforcement actions.

The Backlash and the Future of Crypto Regulations

Crypto firms, financial entities, and Republicans have fiercely opposed the proposed crypto custody regulation. Several critics have maintained that the procedure would reduce the accessibility of advisors working with cryptocurrency properties, thus leading to fewer qualified custodians and increasing complexity in investment procedures. SEC Commissioner Hester Peirce criticized the proposed rule, believing it would damage industry development while inhibiting growth.

Uyeda demonstrates a substantial shift from how the Biden administration had previously handled the issue through this move. The decision emerges as an answer to industry groups and legislative demands for precise and balanced regulatory actions. The SEC’s modified approach will stabilize the crypto market since it has endured regulatory confusion for multiple years. The crypto industry remains attentive because the ongoing SEC review of the custody regulation could signify better upcoming regulations for digital assets. The outcome of SEC crypto task force investigations about alternative regulations remains uncertain for the broader market atmosphere. Through his leadership approach, Uyeda suggests a willingness to cooperate with industry representatives, thus creating potential opportunities for future constructive regulatory development.