Opening the door: SEC issues guidance on brokers’ capital stablecoin requirements

The U.S. Securities and Exchange Commission introduced new guidance allowing broker-dealers to apply a "2% haircut" to proprietary positions in certain stablecoins — a move that some crypto stakeholders say helps bring digital assets closer to traditional finance.

In guidance issued on Thursday by the SEC's Division of Trading and Markets, the staff addressed a customer protection rule requiring broker-dealers to safeguard customers' assets and maintain a cushion for those assets. The new guidance says that "staff would not object if a broker-dealer were to apply a 2% haircut on proprietary positions." A haircut is typically a percentage applied to an asset when it is being used as collateral.

In a statement responding to the guidance, SEC Commissioner Hester Peirce said the use of stablecoins could allow brokers to do more.

"Stablecoins are essential to transacting on blockchain rails," she said. "Using stablecoins will make it feasible for broker-dealers to engage in a broader range of business activities relating to tokenized securities and other crypto assets."

The new FAQ marks the SEC's latest move in being more friendly to the digital asset industry. Over the past year, the SEC has created a crypto task force covering topics ranging from custody to tokenization, embarked on "Project Crypto" to modernize its rules around crypto, and has plans to propose an innovation exemption to integrate tokenization into the capital markets.

More broadly, federal agencies are also working to implement a new law, called GENIUS, that passed last year, creating a federal regulatory framework for stablecoins.

Stablecoins - TradeFi

Firms have to apply "haircuts" to assets to reflect risk, so more volatile assets get bigger haircuts. Some brokers were imposing an 100% haircut on stablecoins, according to Tonya Evans, making holding stablecoins more unaffordable. Evans is a fintech strategist and board member of the Digital Currency Group.

"A 2% haircut changes that calculus entirely by putting payment stablecoins on par with money market funds, which hold similar underlying assets like U.S. Treasuries, cash, and short-term government securities," Evans wrote in a Forbes article.

Former Avalanche COO Luigi D'Onorio DeMeo said the new SEC guidance would mean that stablecoins could be treated like money-market funds. The move "removes a major friction point," and also means stablecoins can become a larger part of traditional finance.

"Lowers the barrier for deeper integration of stablecoins into traditional finance rails = better liquidity, more efficient settlement, and broader institutional on-ramp," he said in a post on X.