Circle Pushes SEC for Stablecoin-Friendly Rules Under GENIUS Act
TREE NEWS reports: Circle has filed a comment letter with the U.S. Securities and Exchange Commission (SEC) on its proposed Regulation Crypto Assets, arguing that payment stablecoins compliant with the GENIUS Act should be classified as “cash” under the proposed rule. The company specifically requests that the SEC clarify that such stablecoins fall within the definition of cash in proposed Rule 302(b), are denominated in U.S. dollars, and are subject to corresponding accounting and customer reserve treatment.
Circle also recommends that the SEC reduce the 2% haircut currently applied to broker-dealers holding these stablecoins to zero, provided objective safeguards are in place. Additionally, the firm asks the SEC to confirm that technical services provided after a network becomes operational—including maintaining a known validator set—do not constitute “essential management efforts,” and to establish a safe harbor for technical roadmaps.
Industry Implications
The request comes as U.S. regulators work to implement the GENIUS Act, which establishes a federal framework for payment stablecoins. If the SEC adopts Circle’s recommendations, it could significantly lower the cost of holding stablecoins for broker-dealers and other financial institutions, potentially accelerating institutional adoption.
Classifying compliant stablecoins as cash would also align their regulatory treatment with their economic function—stablecoins are widely used as a settlement asset and cash equivalent in digital asset markets. The zero-haircut proposal, if accepted, would remove a key capital penalty for brokers and could boost liquidity in stablecoin markets.
The request on “essential management efforts” addresses a longstanding concern in the crypto industry: whether certain technical activities could cause a token to be deemed a security under the Howey test. By seeking clarity that routine network maintenance does not constitute essential management efforts, Circle aims to reduce legal uncertainty for blockchain networks.
Forward-Looking Perspective
The SEC’s response to Circle’s letter will be closely watched as a signal of how the agency intends to regulate stablecoins under the new legislative framework. A favorable outcome could encourage more traditional financial institutions to integrate stablecoins into their operations, further blurring the lines between traditional finance and digital assets. However, the SEC may be cautious about granting broad exemptions, and the final rule could include conditions or limitations. Market participants should monitor subsequent SEC guidance and any amendments to the proposed rule.
