Circle Petitions SEC To Scrap Capital Haircuts On Stablecoins

Circle Petitions SEC For Capital Relief

Circle petitioned the SEC on Oct. 28 to eliminate a 2% regulatory capital haircut that reduces the recognized value of qualifying stablecoin holdings by $20,000,000 per $1,000,000,000. Regulatory filings with the agency indicate the issuer wants compliant digital dollars treated identically to cash across securities markets. Current SEC staff guidance updated in February forces broker-dealers to apply the deduction to proprietary accounts. That haircut restricts institutional balance sheet capacity. The penalty stays in place.

Broker-dealers must maintain qualifying assets in customer reserve accounts under Rule 15c3-3 to protect client funds. SEC rules currently limit those designated reserve assets strictly to cash and traditional securities. Circle wants the agency to clarify that payment stablecoins satisfying federal standards can fulfill those exact obligations. Regulatory approval remains uncertain. Institutional demand hangs in the balance.

Compliance Drives Revenue Amid Market Shifts

Circle has consistently differentiated USD Coin through strict regulatory compliance, notably becoming the first major stablecoin issuer licensed under the European Union's Markets in Crypto-Assets framework. This institutional alignment fueled substantial fiscal growth, generating $1.40Bin revenue across the first half of 2026. However, despite capturing vast institutional interest, USDC has continually trailed Tether's market capitalization, maintaining a circulating supply of $72.5Bcompared to USDT's dominant valuation of $183B. Public market data shows Circle trades at a valuation of approximately $22B following a 60.0% decline from its peak valuation in June of the prior year.

Earlier this year, ecosystem expansion efforts intensified as Circle launched its proprietary Layer-1 blockchain, Arc, while testing autonomous machine payment rails. On-chain transaction records published earlier this week show Arc's stablecoin supply grew by $155Mto reach $670.75M, with USDC comprising over 98% of the network's liquidity. Ethereum retains 66.6% of circulating USDC, while Circle's native Arc chain holds under 1% following a 94% active wallet drop. Those parallel initiatives laid the infrastructure necessary for broader corporate integration and international settlement frameworks.

Targeting Global Remittances Through Expansion

Circle has announced a concerted expansion program targeting 40 emerging markets across Latin America, Southeast Asia, Africa, and the Middle East. The initiative aims to deploy USDC into regions historically burdened by prohibitive cross-border banking fees and fragmented correspondent banking rails. By targeting localized remittance pipelines, the issuer seeks to transition stablecoins from high-frequency trading assets into everyday settlement instruments for developing economies experiencing severe local fiat currency depreciation and restricted access to dollar reserves.

Amplifying this jurisdictional rollout, payment giant Visa transitioned its USDC-settled cross-border payout system from exploratory pilot phases directly into full commercial operation across 180 countries. This institutional integration allows corporate clients and treasury desks to bypass traditional multi-day wire transfers, routing capital directly through blockchain ledgers. To sustain this influx of liquidity, Circle aggressively scaled its minting operations, generating $3.75Bin new USDC on the Solana network over a seven-day period.

Transaction Volume Dominance Meets Barriers

Despite holding less than half of Tether's total market capitalization, USDC has secured dominant market share in transactional utility. Data compiled by Bernstein reveals that USDC commands over 60% of global adjusted transaction volume in 2026. This metric highlights an important divergence: while USDT remains the preferred bearer instrument for offshore capital reserves, USDC has captured the operational payment volume driven by institutional workflows, merchant clearing, and high-frequency automated settlement across diverse decentralized finance applications.

The broadening footprint of regulated dollar tokens reflects wider convergence between traditional financial institutions and digital asset networks. Earlier this week, fintech provider Ramp formally submitted an application for an OCC national trust bank charter, validating the growing demand for compliant custody and digital corporate treasury management. If Circle successfully activates localized payout channels across its targeted emerging jurisdictions, USDC could cement itself as the default institutional settlement standard for international corporate trade. Regulators haven't budged yet.