- Acting U.S. Securities and Exchange Commission (SEC) Commissioner Mark T. Uyeda has questioned the agency’s approach to redefining crypto exchanges
- Uyeda argued that the proposed rule’s broad definition of an “exchange” unfairly targeted crypto assets
- He has directed SEC staff to explore options for abandoning that part of the proposal
Acting SEC Commissioner Mark T. Uyeda criticized the agency’s 2022 proposal to redefine an “exchange” in a way that would encompass crypto-related communication protocols. At the Institute of International Bankers’ Annual Washington Conference, Uyeda argued that the proposal was an overreach, linking unrelated regulatory issues and taking an unnecessarily heavy-handed approach to the crypto industry. He has now instructed SEC staff to reconsider the proposal, given the significant public opposition.
A Misguided Expansion of SEC Authority?
In his speech, Uyeda took issue with the SEC’s decision to broaden the definition of an exchange in its 2022 rule proposal. Originally meant to address regulatory concerns about Government Securities Alternative Trading Systems (ATSs), the rule was expanded to include “communications protocols” used in crypto trading—without clearly defining what that meant.
Uyeda warned that this vague and expansive language could capture a wide range of crypto-related platforms, significantly increasing regulatory burdens:
In my view, it was a mistake for the Commission to link together regulation of the Treasury markets with a heavy-handed attempt to tamp down the crypto market.
Uyeda argued that this approach diverted attention from the core issues surrounding Treasury market transparency while unfairly targeting crypto innovation.
Reevaluating Crypto Exchange Rules
Uyeda acknowledged that the proposal received extensive public criticism, particularly from crypto industry participants who saw it as an aggressive attempt to regulate by redefinition. In response, he has instructed SEC staff to consider abandoning that part of the proposal:
In light of the significant negative public comment received on the definition of exchange with respect to crypto, I have asked SEC staff for options on abandoning that part of the proposal.
This move suggests a potential shift in the SEC’s regulatory approach to crypto, signaling that the agency may be open to more industry-friendly revisions.
What’s Next for Crypto Regulation?
Uyeda’s remarks reflect growing concerns that the SEC’s regulatory stance on crypto has been overly aggressive. His push for a reconsideration of the exchange definition could lead to a more tailored approach that addresses market integrity without stifling innovation.
As the SEC continues to engage with other regulators, the industry will be watching closely to see whether Uyeda’s recommendations lead to a meaningful policy shift.
