The Securities and Exchange Commission (SEC) has overhauled a punitive capital rule that previously stifled on-chain settlement. On Monday, February 23, 2026, the agency’s Division of Trading and Markets issued new guidance slashing the "haircut" on qualifying payment stablecoins for broker-dealers from a de facto 100% to just 2%. This reclassification means that for every $100 of compliant stablecoins held on a firm’s balance sheet, $98 can now be counted toward net capital requirements, putting these digital tokens on a regulatory par with conservative money market funds. By removing the 100% deduction, the SEC is making it economically viable for regulated dealers to use on-chain settlement for securities workflows, signaling a major victory for the implementation of the GENIUS Act. This move arrives as Tether (USDT) continues to dominate the dollar-linked market with a 24-hour turnover exceeding $60 billion, proving that the demand for instant, digital liquidity has finally outpaced the constraints of legacy financial frameworks.

• The SEC's technical "non-objection" status transforms stablecoins from "worthless" regulatory assets into high-quality liquid collateral for broker-dealers.
• A direct alignment with the GENIUS Act establishes a clear standard for reserve transparency, bridging the gap between crypto-native firms and traditional banks.
• Explore how this policy shift sets the stage for the CLARITY Act and the potential for universal on-chain securities trading by late 2026.

For years, the SEC’s 100% haircut requirement served as a massive barrier to entry for traditional finance firms entering the crypto space. Under the old regime, holding a stablecoin balance was a liability that offered zero benefit to a firm's regulatory net capital. The new 2% standard effectively treats payment stablecoins as cash equivalents, allowing broker-dealers to maintain liquidity without the heavy capital penalties that once made on-chain settlement a loss-leading endeavor.

This pivot is not happening in a vacuum. It follows a string of recent milestones, including Harvard’s pivot into Bitcoin ETFs and the launch of TON Pay for global commerce. As the "smart money" moves toward 24/7 settlement, the SEC is being forced to update its rules to prevent a total migration of liquidity to offshore, unregulated venues. By allowing stablecoins to sit inside the regulated perimeter, the agency is ensuring that the US remains a central hub for the next generation of financial infrastructure.

The timing of the SEC’s decision is deeply intertwined with the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins). This legislation created the first federal framework for stablecoin issuers, mandating 1:1 reserves in high-quality assets like short-term Treasuries. The SEC's haircut reduction is the regulatory "second half" of that act, providing the incentive for broker-dealers to actually use the tokens that the GENIUS Act sought to regulate.

Market watchers are now looking toward the upcoming markup of the CLARITY Act, which aims to further define which agencies have jurisdiction over various digital asset classes. This legislative momentum is already impacting market behavior. While Bitcoin (BTC) trades sideways near $68,100 and Ethereum (ETH) hovers around $1,960, the underlying plumbing, the stablecoins, is seeing massive institutional adoption. This mirrors the Aave founder's recent pitch for a $50 trillion "abundance asset" boom, where the tokenization of everything from solar debt to real estate requires a stable, low-haircut digital dollar to function.

The reclassification of stablecoins as high-quality collateral will likely trigger a surge in the use of on-chain settlement for traditional stocks and bonds. SEC Commissioner Hester Peirce has long argued that the previous stance was purely punitive. Now, with the "haircut" reduced to 2%, the economics of the "everything exchange" model finally make sense.

As broker-dealers rebalance their portfolios, the dominance of Tether (USDT) and its peers is expected to solidify. For the first time, a firm can hold $1 billion in stablecoins and only be "taxed" $20 million in capital charges, rather than losing the full $1 billion in capital utility. This is the moment the "outside" crypto world officially becomes the "inside" financial world.

Quotes and Expert Opinions

"Staff would not object if a broker-dealer were to apply a 2% capital haircut to qualifying payment stablecoins. This shift corrects a punitive regime that had effectively rendered these balances worthless for net capital purposes." — Official Statement, SEC Division of Trading and Markets

"This is a big deal. Stablecoins are now treated like money market funds on a firm’s balance sheet. We are moving from a world where stablecoins orbited the regulated plumbing to a world where they are the plumbing." — Prof. Tonya Evans, Digital Asset Legal Scholar

"The SEC is finally recognizing the reality of the GENIUS Act. By slashing the haircut to 2%, they are allowing broker-dealers to participate in on-chain settlement without being penalized for innovation." — Hester Peirce, SEC Commissioner

FAQs

What is a "haircut" in the context of SEC broker-dealer regulations?
In finance, a "haircut" is the percentage reduction applied to the value of an asset when it is being used to meet capital requirements. A 2% haircut means the SEC considers $100 of payment stablecoins to be worth $98 of "safe" capital. Previously, a 100% haircut meant those same tokens counted as $0.

How does the GENIUS Act influence this new SEC guidance?
The GENIUS Act provided the legal definition and reserve requirements for what constitutes a "payment stablecoin." Because these tokens are now backed by transparent, high-quality reserves (like US Treasuries), the SEC can safely lower the risk weight (haircut) to match other low-risk assets like money market funds.

Why is this a major boost for on-chain settlement?
When broker-dealers trade securities, they must prove they have enough "net capital" to cover risks. If stablecoins have a 100% haircut, using them for settlement is extremely expensive. At a 2% haircut, it becomes much cheaper and more efficient to settle trades instantly using blockchain technology.