SEC Updates Crypto FAQ: Broker-Dealers Can Treat Payment Stablecoins as “Ready Market”

Key Takeaways

• SEC unit volition not entity to a 2% haircut connected proprietary “payment stablecoin” positions for broker-dealer nett capital.

• The haircut is taken connected the greater of the agelong oregon abbreviated presumption (not netted).

• The guidance is staff-level and applies lone to “payment stablecoins” arsenic defined successful the FAQ.

The Securities and Exchange Commission (SEC)’s Division of Trading and Markets has issued a constrictive but consequential clarification for broker-dealers that clasp stablecoins connected their ain books.

In a caller Frequently Asked Questions (FAQ) entry, SEC unit said it volition not entity if a broker-dealer treats a proprietary presumption successful a qualifying “payment stablecoin” arsenic having a “ready market” nether Rule 15c3-1 and applies a 2% haircut erstwhile calculating nett capital.

The applicable connection is unusually direct.

Staff “will not object” if the steadfast takes “a haircut of 2% of the marketplace worth of the greater of the agelong oregon abbreviated proprietary presumption successful outgo stablecoin.”

That “greater of agelong oregon short” conception matters due to the fact that it prevents firms from shrinking superior charges simply by offsetting exposures connected paper.

Rule 15c3-1 is the broker-dealer nett superior rule.

It is 1 of the halfway constraints that determines what regulated intermediaries tin hold, and astatine what scale.

Regulators use “haircuts” to positions to relationship for imaginable losses oregon liquidity stress.

In practice, firms debar holding assets deemed efficaciously unusable for superior purposes oregon support lone minimal operational amounts.

Commissioner Hester Peirce underscored that constituent successful a connection accompanying the FAQ.

She noted that immoderate broker-dealers had been reasoning astir a 100% haircut “out of an abundance of caution.”

She described this imaginable result arsenic “unnecessarily punitive” and emphasized that the staff’s projected attack provides a much applicable baseline for stablecoins utilized arsenic transaction rails.

The FAQ isn’t a broad greenish airy for each dollar-pegged token.

It applies lone to “payment stablecoins” arsenic the SEC unit defines them. This means the issuer, backing, redemption terms, and ongoing disclosures indispensable conscionable circumstantial conditions.

The upshot: this sketches a lane for compliance-forward stablecoins, not wide superior alleviation for the full category.

The outgo stablecoin haircut update landed alongside different broker-dealer nett superior clarifications.

In the aforesaid section, SEC unit besides addressed however broker-dealers supporting spot crypto exchange-traded products (ETPs) successful the exchange-traded money (ETF) stock issuance and withdrawal process should dainty proprietary Bitcoin oregon Ether positions for nett superior purposes.