SEC Allows Broker-Dealers to Count Stablecoin Holdings as Regulatory Capital

This week, broker-dealers overseen by the U.S. Securities and Exchange Commission (SEC) received an important update: they can now count their stablecoin holdings as regulatory capital. This change was noted in an amended FAQ document from the SEC.

Confusingly, it’s part of the SEC’s “Broker-Dealer Financial Responsibility” FAQs. Over the past few years, the agency has gradually adjusted its stance on cryptocurrencies, often offering informal guidance and communicating directly with the industry. This ongoing evolution started during former President Donald Trump’s time in office.

The latest amendment introduces a new question regarding what “haircut” a company should apply to its stablecoin assets—like Circle’s USDC or Tether’s USDT. The answer? A haircut of 2%. Essentially, this means companies can now consider 98% of their stablecoin holdings as part of their capital, a significant shift from the prior understanding that such holdings didn’t contribute at all (effectively a 100% haircut).

“While this guidance doesn’t establish new rules, it definitely alleviates some of the uncertainty for companies aiming to comply with current securities regulations,” commented Cody Carbone, CEO of the Digital Chamber of Commerce.

Now, stablecoins are viewed similarly to other financial instruments, which is noteworthy. “This is a game-changer; stablecoins are now treated just like money market funds on corporate balance sheets,” noted Tonya Evans, a former professor and current expert in virtual currency education.

In a social media post, Evans explained that, prior to this update, some broker-dealers faced financial penalties for including stablecoins in their capital assessments. That situation has changed.

Previously, the SEC had stringent rules blocking these firms from effectively managing tokenized securities or facilitating trades. However, compliance with this new guideline should allow them to enhance liquidity, support payments, and encourage advancements in tokenized finance.

“From Robinhood to Goldman Sachs, everyone operates with these calculations,” stated Larry Florio, deputy general counsel at the Esena Institute. On LinkedIn, he remarked that stablecoins are now functioning as working capital.

SEC Commissioner Hester Peirce, who leads a dedicated committee, expressed that stablecoins could open up various business avenues for broker-dealers dealing with tokenized securities and other crypto assets. Peirce also suggested looking into how existing SEC regulations might adapt to account for payment stablecoins.

However, there’s a caveat: informal staff policies can be easily reversed and lack the legal strength of formal rules.

The SEC has been working on formal crypto regulations for several months, but as of now, nothing has been enacted, a process which can take quite a long time. There’s also a risk that changes could come from new leadership within the agency. Therefore, cryptocurrency advocates are pressing Congress to create legislation that would provide stability and guidance for digital assets, such as the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act passed last year.