On June 12, the SEC announced withdrawing all the previous crypto rules and guidelines under the Biden administration. As a result, it is expected that more than a dozen crypto laws/rules will go defunct in a couple of days.
However, two of the rules would be the most important ones to shape the course of crypto in the United States. But at the moment, it has not been finalized whether these rules will be fully adopted. That will only happen once they are passed by the Senate and into law thereafter.
Down Goes 3b16 Crypto Rules: Exchange Definition Proposed for Nullification
In 2022, the SEC under Gary Gensler, with Mark T. Uyeda, the commissioner in the SEC, proposed amendments to Rule 3b16. The crypto rule defines that the word exchange will be used more thoroughly. For example, anyone who would be using a platform to purchase government securities will be considered an exchange. As a result, they must register with the SEC for any forthcoming operations. Previously, as you can see, it mentioned government-backed securities.
But after the inclusion of crypto in the US as a mainstream exchange medium, a new rule was implemented. The rule states that where if an exhange is doing any of this, consequently, executing a conditional order systems, request for quote for non government securities (“RFQ”) systems, negotiated orders initiated via OMS/EMS scraping systems, and “stream axes” (IOI or firm, negotiated or auto-ex), they would be considered an exchange. Furthermore, they must comply with all the legal requirements.
Due to this, even DeFi protocols were put under the compliance burden because they were doing all these. Consequently, Coinbase CEO Brian Armstrong had to face the wrath of the SEC because he failed to comply with all the rules demanded. But with the passage of the new bill under the new SEC chair, Mark T. Uyeda, this rule will cease to exist.
Crypto Custody Rule To Follow The Same Route
Custodian practices were under the scanner in the year 1962, and a new rule was passed named the Investment Advisers Act of 1940 (“IAA” or “the Act”). As per the Act, any governing body handling an investor’s fund must store the money/ assets with a qualified custodian. This could be a government bank or any government blacked institution. Due to this, it completely defeated the purpose of anonymity, and most exchanges and wallets did not fall under the Qualified Custodian Category. As a result, they were either forced to comply with the SEC practices or leave midway. Many of the protocols or exchanges were like sitting ducks for raids.
What Has Changed with the SEC Axing Biden-era Proposed Crypto Rules?
Institutions/ Government bodies Crypto Adoption
Under the SEC‘s SAB 121, it was difficult for an institution to adopt crypto because they had to meet all the regulatory hurdles in 30 days or face the SEC’s wrath. But with the withdrawal of the SAB 121, now institutions and governments can easily hold crypto. Moreover, they need not have to keep all the reserves to offset any sharp falls, but whatever is required as per the prevailing market sentiments/levels where those cryptos were acquired.
Suppose traditionally, if a bank has $100, the bank will keep 20$ as CRR, and lend out the 80$ in hand. But with crypto, if the investors deposited $100, the bank must keep $20 of reserves in any situation. Which means, if $20 becomes $5 as per market sentiments, the banks will have to add more from their provisions. In this way, it made it difficult for banks to hold and offer crypto to the public. But with the recent introduction of the new rules, this will no longer exist. This allows more institutions/government bodies to adopt crypto, taking the crypto Twitter by storm.
Market Sentiments Improving
Market sentiments started to shape favorably after the SEC’s plan to scrap the old crypto rules. For example, Bitcoin saw a steady jump to the $112k levels, and even ALTs are walking in the same footsteps. The crypto Twitter has also been vocal about the new light of day. Most of the users believe that crypto is winning. Kyle Chase, a crypto influencer, said that” with the SEC saying that crypto staking on PoS networks doesn’t amount to being considered as staking securities, this is going to be big in the crypto space. Introducing new rules will bolster adoption