Today, the staff of the Division of Trading and Markets issued an FAQ relating to the treatment of payment stablecoins[1] under the broker-dealer net capital rule (Exchange Act Rule 15c3-1). The FAQ provides that the staff would not object if a broker-dealer were to apply a 2% haircut on proprietary positions in a payment stablecoin when calculating its net capital.[2] I appreciate the staff’s approach.
Stablecoins are essential to transacting on blockchain rails. 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.
FAQs like this shed light on the staff’s thinking about emerging issues. At the Commission level, I would like to consider how Rule 15c3-1 could be amended to account for payment stablecoins. To that end, I would be grateful to hear from market participants about their views, and welcome input on other aspects of our rules that they believe should be modified to address the use of payment stablecoins by SEC-registered entities.
[1] The term “payment stablecoin” is defined in the FAQ as: (a) prior to the effective date of the GENIUS Act, a USD-denominated stablecoin that: (1) is issued by a state regulated money transmitter, state-regulated trust company, or a national trust bank; (2) maintains reserve assets that meet the requirements of 12 U.S.C. 5903(a)(1)(A); (3) publicly discloses the issuer’s redemption policy; and (4) publishes a monthly attestation report prepared by a registered public accounting firm as defined in 12 U.S.C. 5901(26) applying the attestation standards of the American Institute of Certified Public Accountants regarding the composition of the reserve assets and whether the fair value of the assets held in reserve is equal to the amount of stablecoins in circulation; and (b) following the effective date of the GENIUS Act, a stablecoin that meets the requirements contained in the GENIUS Act’s definition of “payment stablecoin” and is issued by a “permitted payment stablecoin issuer” or a “foreign payment stablecoin issuer” that complies with the GENIUS Act’s requirements applicable to such issuers.
[2] Rule 15c3-1 does not explicitly address payment stablecoins. I understand that some broker-dealers, out of an abundance of caution, have proposed to take a 100% haircut on payment stablecoins held in their inventory. In my view, a 100% haircut would be unnecessarily punitive given the underlying reserve assets that back payment stablecoins (generally, U.S. dollars, short-term U.S. Treasury securities and other similar instruments). For context, a haircut of 2% aligns with the haircut imposed on registered investment companies that are money market funds, which hold similar instruments as payment stablecoin issuers. In fact, following the effective date of the GENIUS Act, the reserve requirements for permitted payment stablecoin issuers will be more limiting than the “eligible securities” requirements that apply to registered money market funds, including government money market funds.
