Circle wants SEC to erase a costly Wall Street rule holding stablecoins back
Circle is pushing the US Securities and Exchange Commission to treat regulated stablecoins like cash across securities markets, potentially expanding USDC's institutional adoption.
Circle outlined its proposals in an Oct. 28 statement, following an Oct. 20 letter requesting changes to how qualifying stablecoins are treated in securities fundraising, brokerage capital calculations, and customer reserve accounts.
The proposed changes could give stablecoins a broader role in traditional finance by allowing financial institutions to use them for activities currently governed by cash-specific requirements.
Cash treatment request
Circle's letter responds to the SEC's proposed Regulation Crypto Assets, which would establish a new framework for companies raising capital through certain cryptocurrency offerings.
The proposal introduces two exemptions from traditional securities registration requirements. One would let companies raise up to $5 million over four years, while another would allow offerings of up to $75 million annually, subject to disclosure and other requirements.
Circle supports the framework but wants regulators to clarify that payment stablecoins issued under the GENIUS Act's regulatory standards qualify as cash when investors participate in these offerings.
Without that clarification, companies could face different regulatory requirements depending on whether investors pay through bank transfers or blockchain-based dollar tokens.
Wall Street expansion
Beyond crypto fundraising, Circle is pursuing changes that could make stablecoins more attractive to Wall Street broker-dealers, particularly regarding how securities firms calculate their regulatory capital.
Under SEC staff guidance updated in February, broker-dealers can apply a 2% haircut to qualifying stablecoin positions held for their own accounts when calculating net capital.
Circle wants to eliminate this deduction for payment stablecoins that meet the GENIUS Act's requirements, arguing that the law's reserve, redemption, liquidity, and consumer protection standards justify treating compliant stablecoins more favorably.
The company is also seeking a separate change to the SEC's customer protection requirements under Rule 15c3-3, which currently requires broker-dealers to maintain qualifying assets in reserve accounts to protect customer funds.
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