The U.S. Securities and Exchange Commission (SEC) has made a crypto-friendly change that makes it easier for financial firms to use certain stablecoins.
Earlier, broker-dealers had to treat stablecoins as very risky assets, meaning they could not count their full value when calculating company capital.
A 100% “haircut” meant $100 in stablecoins counted as almost nothing for regulatory purposes. Now, the SEC has reduced this haircut to just 2 percent. This means $100 worth of approved stablecoins can count as $98 toward a firm’s required capital.
In simple terms, regulators are now treating these stablecoins as much safer, similar to low-risk money market funds, which could encourage wider use of stablecoins in traditional finance.
SEC allows 2 percent capital haircut for payment stablecoins
The U.S. Securities and Exchange Commission (SEC) has now made it clear in a new FAQ that it would permit broker-dealers to apply only a 2 percent capital haircut to certain payment stablecoins in calculating their net capital.
In simpler terms, this means that firms are now able to consider approved stablecoins as less risky assets rather than extremely risky assets.
According to SEC Commissioner Hester Peirce, this move will correct previous rules that were too harsh and had rendered the use of stablecoins for trading and settlement purposes useless. This is because firms previously assumed a 100 percent haircut.
Experts link SEC move to GENIUS Act reforms
Industry insiders and lawyers consider this a further extension of the reforms that were brought about by the GENIUS Act, which defined the standards for the reserves and regulation of stablecoins.
With stablecoins that meet the standards now being considered more like cash or money market funds, industry insiders see this as a way for traditional financial markets to more easily integrate with blockchain-based settlement and liquidity infrastructure.
Industry insiders consider this a sign that the SEC’s decision to lower the stablecoin capital haircut will have an impact on future discussions regarding the regulation of the crypto industry, including the CLARITY Act and other significant crypto policy initiatives that are expected to emerge later this year.
The message to broker-dealers is clear: the SEC is becoming more receptive to the idea of using stablecoins directly within regulated financial markets, such as trading, settlement, and liquidity, rather than having to maintain crypto assets separate from the financial markets.