The United States Securities and Exchange Commission (SEC) has withdrawn its appeal against a Texas federal court ruling that rejected its broker-dealer rule. The rule aimed to expand the agency’s oversight by classifying decentralized finance platforms, liquidity providers, and automated market makers with over $50 million in capital as dealers, subjecting them to registration requirements.

Background of the Case

In February 2024, the SEC finalized the policy, which was met with resistance from industry groups, including the Blockchain Association and the Crypto Freedom Alliance of Texas. The groups argued that the rule would impose unworkable compliance burdens on DeFi protocols, which lack central operators capable of enforcing Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.

Ruling and Appeal

U.S. District Judge Reed O’Connor of the Northern District of Texas ruled that the SEC had “exceeded its statutory authority” with the rule. The SEC appealed the ruling, but has now voluntarily dismissed its appeal, bringing the legal dispute to an end.

Industry Reaction

Kristin Smith, CEO of the Blockchain Association, welcomed the SEC’s decision, describing it as a turning point for the agency following former Chair Gary Gensler’s regulatory crackdown on cryptocurrency. She characterized the SEC’s broker-dealer rule as an “unlawful power grab” that attempted to redefine the agency’s statutory authority without proper justification.

Shifting Tides in Washington’s Approach to Crypto

The SEC’s retreat on the broker-dealer rule is just the latest sign of shifting tides in Washington’s approach to crypto. With Gensler out of the picture, the agency has undergone a major course correction under new leadership. Acting Chair Mark Uyeda has since been steering the agency toward a more measured approach, dialing back litigation efforts that defined Gensler’s tenure.

Implications for the Crypto Industry

The withdrawal of the appeal is a significant development for the crypto industry, which has been facing increased regulatory scrutiny in recent years. The decision may signal a more favorable regulatory environment for cryptocurrency and blockchain companies.

Tips for investors and industry participants:

  • Stay informed about regulatory developments and their potential impact on the crypto market.
  • Understand the implications of the SEC’s decision on the broker-dealer rule for your business or investments.
  • Monitor the SEC’s approach to crypto regulation under new leadership.

For more news and updates on the crypto and blockchain space, visit Global Crypto News.

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