SEC makes quiet shift to brokers’ stablecoin holdings that may pack big results

The U.S. Securities and Exchange Commission (SEC) has made a significant change that allows broker-dealers to treat their stablecoin holdings as regulatory capital. This update was made in the SEC’s “Broker Dealer Financial Responsibilities” FAQ, adding a new question about the haircut firms should take on their stablecoin holdings. Previously, stablecoins were not considered measurable against a broker-dealer’s capital tally, but now firms can count 98% of those holdings, with a 2% haircut.

This change is a major step that reduces uncertainty for firms operating under current securities laws. Cody Carbone, CEO of the Digital Chamber, stated that while this guidance does not create new rules, it aligns stablecoins with other financial products, such as money market funds.

Former professor Tonya Evans, who now runs a crypto education business, explained that stablecoins are now treated like money market funds on a firm’s balance sheet. This new guidance allows broker-dealers to more easily provide liquidity, aid settlement, and advance tokenized finance.

Larry Florio, deputy general counsel at Ethena Labs, emphasized the significance of this change, stating that stablecoins are now considered working capital for firms. SEC Commissioner Hester Peirce also supported the change, noting that it will enable broker-dealers to engage in a broader range of business activities related to tokenized securities and other crypto assets.

While this update is a positive development for the crypto industry, it is important to note that informal staff policies like this one can be easily reversed. Formal rules, which take time to develop, can also be overturned by new leadership at the agency. To provide more certainty and clarity, crypto advocates are calling for legislation from Congress, such as the GENIUS Act, to establish a clear framework for the government’s approach to digital assets.

Overall, the SEC’s decision to allow broker-dealers to include stablecoin holdings as regulatory capital marks a significant shift in how these assets are viewed within the industry. This change opens up new opportunities for broker-dealers to participate in tokenized finance and will likely have a positive impact on the broader crypto ecosystem.