Proposed digital asset custody rule under reevaluation

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The acting Chair of the United States Securities and Exchange Commission (SEC), Mark Uyeda, has asked staff to consider dropping a Biden-era proposal to tighten digital asset custody requirements, signaling a further move toward President Trump’s pro-crypto agenda.

On March 17, in prepared remarks to an investment industry conference in San Diego, Uyeda said commenters had “expressed significant concern with the broad scope of the proposed safeguarding rule.”

He added that “given such concern, there may be significant challenges to proceeding with the original proposal. As such, I have asked the SEC staff to work closely with the crypto task force to consider appropriate alternatives, including its withdrawal.”

Registered investment advisers are subject to a ”custody rule” requiring them to maintain assets with a qualified custodian, such as a bank or broker-dealer. Under previous Chair Gary Gensler and during the administration of former President Joe Biden, the SEC proposed extending those standards to digital assets, meaning most digital asset exchanges and wallets would be disqualified from offering custody solutions. Concerns were also raised that the proposed rule would further limit the number of banks willing to do business with the sector.

Nevertheless, it passed a vote of the SEC commissioners in February 2023, with 4-1 in favor of the new rule. “Crypto Mom” Hester Peirce was the only dissenting vote, saying at the time that some of the requirements, such as a written agreement between custodians and advisers, “may be difficult for advisers and costly for clients. Small advisers may have a particularly difficult time complying with these requirements.”

Uyeda changing the formula

Uyeda’s decision to revisit the custody rule is just the latest in a string of moves aimed at softening the SEC’s approach to the digital asset space since he took over from Gensler, who stepped down in January.

One of Uyeda’s first acts was to remove the agency’s controversial staff accounting bulletin 121 (SAB 121).

SAB 121 was released in March 2022 as a policy guideline, outlining how virtual asset service providers (VASPs) must handle accounting for digital assets and putting additional capital requirements on banks wanting to handle digital assets for clients. It contained strict guidelines for institutions looking to custody digital assets, including the requirement that VASPs maintain their users’ digital asset holdings on their own balance sheets.

On January 23—barely three days after being announced as Gensler’s temporary successor—Uyeda published a new staff accounting bulletin, SAB 122, rescinding the previous guidance.

Most recently, on March 10, at the 2025 Annual Washington Conference of the Institute of International Bankers, Uyeda said he had asked SEC staff ” for options on abandoning ” part of a proposed rule change that could force some digital asset firms to register with the regulator as exchanges.

Both actions indicate a change in course for the SEC under the Trump administration, from the regulation-by-enforcement approach spearheaded by Gensler and backed by former President Biden to a more industry-friendly SEC that has emerged since January.

In December, Trump picked former SEC Commissioner Paul Atkins to take over as permanent SEC chair, and a Senate hearing on the appointment is reportedly being mooted for March 27. In the meantime, Uyeda is certainly making the most of his limited reign as head of the SEC.

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