The US Securities and Exchange Commission (SEC) is considering changes to a proposed rule that would tighten crypto custody standards for investment advisers, according to the agency’s acting chair, Mark Uyeda. In a recent speech at an investment industry conference, Uyeda acknowledged the “significant concern” expressed by commenters over the rule’s broad scope and stated that the SEC may have to withdraw or revise the proposal.

The rule, which was proposed in February 2023 during Gary Gensler’s tenure as SEC chair, aimed to expand custody rules for investment advisers to include all assets held for clients, including cryptocurrencies. It also required investment advisers to use qualified custodians to hold their clients’ crypto assets. However, this proposal faced pushback from Uyeda and Commissioner Hester Peirce, as well as industry advocacy groups who argued that it was unlawful and could harm the industry.

Uyeda’s latest remarks come after he previously stated that he had asked SEC staff to explore options for abandoning a proposal that would require certain crypto firms to register with the regulator as exchanges. This move signals a potential shift in the SEC’s approach to regulating the crypto industry under the new administration.

In addition to the proposed custody rule, the SEC has also rescinded a rule that required financial firms holding crypto assets to record them as liabilities on their balance sheets. And with former SEC Commissioner Paul Atkins set to take over as chair, the agency’s stance on crypto regulation may continue to evolve.

While the SEC’s actions may bring some relief to the crypto industry, there are still many unanswered questions about how the agency will approach regulation in this space. As the industry continues to grow and evolve, it is crucial for regulators to strike a balance between protecting investors and fostering innovation. Only time will tell how the SEC will navigate this complex landscape.