SEC Pivot: Wall Street Broker-Dealers Cleared to Hold Stablecoins as Cash Equivalents

In a watershed moment for the integration of digital assets into traditional finance, the U.S. Securities and Exchange Commission (SEC) has effectively greenlit the use of payment stablecoins as cash equivalents for Wall Street broker-dealers. The agency’s Division of Trading and Markets issued new guidance on February 19, 2026, allowing registered firms to apply a mere 2% capital ‘haircut’ to proprietary stablecoin positions—a dramatic reduction from the prohibitive 100% deduction previously applied. This regulatory breakthrough, following the landmark passage of the GENIUS Act last summer, removes one of the final barriers preventing major financial institutions from holding digital dollars directly in their treasuries.

The 2% Rule: A Game Changer for Capital Efficiency

For years, SEC Rule 15c3-1, known as the net capital rule, served as a de facto ban on broker-dealer adoption of stablecoins. Under previous interpretations, firms holding assets like USDC were required to set aside 100% of the value in capital reserves to cover potential losses, making the practice commercially unviable. The new FAQ guidance rewrites this calculus entirely, treating ‘payment stablecoins’ with the same risk weighting as money market funds.

“A 2% haircut changes the economic reality for every trading desk on Wall Street,” explains financial analyst Sarah Jenkins. “It allows broker-dealers to use digital dollars for real-time settlement and collateral management without wrecking their balance sheets. We are effectively seeing the digitization of the broker-dealer treasury function.” The move is expected to unlock billions in liquidity that can now flow seamlessly between traditional securities and on-chain markets.

Hester Peirce: ‘Cutting by Two Would Do’

SEC Commissioner Hester Peirce, long a champion of crypto regulatory modernization, hailed the staff’s decision in a statement titled ‘Cutting by Two Would Do.’ Peirce emphasized that the punitive 100% haircut was no longer justifiable given the stringent reserve requirements mandated by the GENIUS Act. “Stablecoins are essential to transacting on blockchain rails,” Peirce noted. “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.”

The guidance specifically applies to stablecoins that meet the definition of a “payment stablecoin” under the GENIUS Act. This ensures that only tokens fully backed by cash and U.S. Treasuries—and subject to monthly public attestations—qualify for the preferential capital treatment. The decision signals a clear intent by regulators to privilege regulated, transparent issuers like Circle over opaque offshore alternatives.

The GENIUS Act Effect and Institutional Adoption

This regulatory pivot is the direct downstream effect of the “Guiding and Establishing National Innovation for U.S. Stablecoins Act” (GENIUS Act), signed into law by President Trump in July 2025. The legislation established the first federal framework for stablecoin issuance, requiring 1:1 liquid reserves and banning algorithmic models. With the legislative bedrock in place, regulators are now aligning their internal rules to match the new reality.

Market participants are already moving to capitalize on the change. Institutional on-chain volume for USDC has spiked 15% since the announcement, as trading firms prepare to integrate stablecoins into their settlement workflows. “The friction is gone,” says a head of digital assets at a major prime broker. “We can now hold digital dollars overnight without a capital penalty. This paves the way for 24/7 settlement of tokenized treasuries and equities, which is the holy grail for operational efficiency.”

What’s Next: The CLARITY Act and Beyond

While the net capital rule update addresses the “plumbing” of Wall Street, the broader industry is looking toward the pending CLARITY Act to resolve remaining jurisdictional disputes between the SEC and CFTC. However, the immediate impact of the 2% rule cannot be overstated. By treating compliant stablecoins as ‘cash equivalents’ rather than speculative assets, the SEC has effectively integrated the crypto economy’s base layer into the U.S. financial system.

As 2026 unfolds, the convergence of traditional finance and digital assets is accelerating. With broker-dealers now cleared to hold stablecoins, the infrastructure for a tokenized financial system is officially open for business.