SEC Eases Rules, Allows Stablecoins in Capital With 2% Haircut

SEC updates broker-dealer FAQ, permitting eligible stablecoins in capital calculations with 2% haircut, boosting institutional adoption and settlement efficiency.

The U.S. Securities and Exchange Commission has updated its Broker-Dealer Financial Responsibility FAQ this week. The revision enables broker-dealers to include eligible stablecoins in their regulatory calculation of capital. Consequently, the haircuts firms can now take are only 2% instead of 100%.

SEC Updates Capital Treatment Framework for Stablecoins

Under common market practice, previously stablecoins were subject to a 100% haircut. Therefore, they were excluded completely from regulatory capital reserves. However, the SEC now allows recognition at 98% market value.

Under the guidance of the broker-dealers, they can count 98% of qualifying stablecoin holdings. This adjustment makes regulated financial institutions more capital efficient. Because of this, stablecoins achieve parity with some quality liquid assets.

Importantly, the 2% haircut matches the kind of treatment applied to money market funds. Regulators believe those instruments are relatively low risk and highly liquid. Therefore, the update is indicative of increasing acceptance of digital payment assets.

It is the FAQ that dictates eligibility criteria for “payment stablecoins.” These assets need to comply with regulatory and transparency standards. For example, issuers should be operating under a system of state-level supervision.

Further, qualifying issuers must publish monthly attestation reports in regard to reserves. This requirement increases confidence in supporting assets and liquidity management. Therefore, compliance is still at the core of eligibility.

Examples that are mentioned in the industry are USDC and USD1. Circle issues under regulated structures usdc. Meanwhile, USD1 operates in characterized reserve transparency standards.

Strategic Implications for Institutions and Markets

The revised framework dramatically cuts capital charges related to the holding of stablecoins. As a result, broker-dealers can potentially use stablecoins in an active manner for on-chain settlement activities. This shift makes economic viability for blockchain-based transactions better.

Furthermore, stablecoins may provide support for tokenized securities trading in regulated environments. Lower capital burdens provide incentives for integration into clearing and settlement workflows. Therefore, adoption barriers are still on a downfall across traditional finance sectors.

The guidance comes as lawmaking on digital assets continues to grow. Policymakers continue to make progress in frameworks for reserve standards and issuer oversight. For that reason, regulatory clarity is a priority.

Industry reports credit movement in part to Commissioner Hester Peirce’s efforts to advocate for. SEC Chair Paul Atkins also stressed the pragmatic integration of compliant digital assets. Therefore, leadership alignment is related to the timing of this policy clarification.

Additionally, the update anticipates implementation of the GENIUS Act. The legislation provides federal oversight and reserve standards for issuers. For that reason, the revision of the FAQ supports compatibility with future statutory requirements.

Market players were positive about the SEC’s capital treatment adjustment. Stablecoin issuers and exchanges touted possible liquidity benefits. Meanwhile, broker-dealers considered operational implications for treasury management.

Importantly, the SEC emphasized that only eligible stablecoins are covered by this rule. Non-compliant assets are still excluded from regulatory capital recognition. Therefore, financial institutions have continued obligations related to due diligence.

The development is a significant step towards integrating digital assets into mainstream finance. Stablecoins are increasingly becoming a bridge between fiat and blockchain services. As a result, the regulatory treatment keeps evolving in accordance with market adoption trends.