Circle Tells SEC: Treat Stablecoins Like Cash, Scrap the 2% Hit

Circle has drawn a line in the sand with the SEC. In a comment letter posted October 28, the USDC issuer is asking regulators to treat qualifying payment stablecoins exactly like cash in new crypto fundraising rules and to drop the broker-dealer capital haircut from 2% straight to zero.

Why Regulators Still See Stablecoins as Risky Assets

The current 2% haircut exists because the SEC views most crypto holdings as volatile and hard to liquidate without price slippage. That logic worked for Bitcoin or Ether, but Circle argues it breaks down for a payment stablecoin pegged 1:1 to the dollar and backed by short-term Treasuries and cash equivalents. Why does this distinction matter so much for market makers?

Broker-dealers that custody USDC for clients or use it in settlement would free up meaningful balance sheet if the rule changes. A 2% charge on even moderate holdings adds up fast when you are running high-volume desks or handling tokenized fund flows.

The Numbers Behind the Ask

Circle’s letter points out that qualifying stablecoins already meet the same liquidity and credit standards as other instruments the SEC allows to sit at 100% of face value. USDC’s reserve composition — largely overnight reverse repos and T-bills — matches the profile of money-market instruments that carry no haircut today. Treating them differently forces firms to hold extra capital against an asset that has never broken its peg in practice.

If adopted, the change would lower the cost of holding and transferring stablecoins inside registered entities. That matters for prime brokers and ATS operators who currently route around USDC to avoid the capital drag.

How This Fits the Wider Regulatory Picture

Stablecoin rules have been inching forward on both sides of the Atlantic. Europe’s MiCA framework already classifies well-regulated stablecoins as a distinct category with clear reserve requirements. In the U.S., the SEC’s proposed amendments to fundraising rules are one of the first places where capital treatment could be locked in for years. Circle’s filing is an attempt to shape that definition before it hardens.

Market reaction so far has been muted because the letter is still just a comment, not a rule change. But desks that trade USDC pairs or use it for funding are watching the docket closely. A favorable outcome would reduce friction for institutional flows; a rejection would keep the status quo and the extra capital cost.

What It Means on the Desk

Anyone running a crypto prime brokerage book has been pricing in that 2% charge when calculating return on capital for stablecoin positions. Removing it would let those same desks tighten quotes or take larger size without hitting internal risk limits. It is not a dramatic move, but it is not nothing either when spreads on major pairs already sit near all-time lows.

Even so, the SEC could decide the peg is only as good as the attestation process behind it. One missed reserve report or a sudden shift in the composition of Circle’s holdings would quickly reopen the debate. Watch position sizing here — the capital relief is real only if the rule actually lands in final form.