Stablecoins Apply for “Cash” Status: The Last Lobbying Round for the SEC’s New Rules

Circle is asking the SEC to treat GENIUS-compliant stablecoins as “cash” and cut broker haircuts to zero; the same week, PwC’s report declared the end of the rulebook era. US crypto regulation is shifting from writing rules to assigning status.

Stablecoins Want to Be “Cash”: Circle’s Four Requests

The SEC’s proposed Regulation Crypto Assets (File No. S7-2026-27) was released on August 18 and published in the Federal Register on August 21 (91 FR 54510). It is a 146-page proposal with 149 numbered questions. The core problem it addresses: offering exemptions and safe harbors for crypto assets. The proposal creates a $5 million startup exemption over four years, a two-tier fundraising exemption of $20 million and $75 million per 12 months, and the Rule 400 conditional safe harbor: once an issuer files Form TR certifying that its promised essential managerial efforts are complete or permanently ceased, the investment contract stops being a security, with no deadline, no decentralization test, and no staff review. When the comment period closed on October 20, the SEC had received roughly 140 submissions.

Circle was one of the institutions that filed at the deadline, and it publicized the letter through its official blog on October 28. The payment stablecoin issuer’s asks are tightly focused: make Reg Crypto Assets consistent with the GENIUS Act, and give compliant stablecoins an explicit “cash” status. The first request is the most consequential: Circle asks the SEC to clarify that GENIUS-compliant payment stablecoins constitute “cash” under proposed Rule 302(b), are denominated in U.S. dollars, and qualify for the corresponding accounting and customer-reserve treatment. That would mean stablecoins are no longer treated as risk assets requiring haircuts, but can enter a broker’s cash ledger. The second request is to cut the 2% haircut applied to broker-dealers holding such stablecoins to zero, subject to objective safeguards. The third request targets the “essential managerial efforts” test in Rule 400: technical services performed after a network becomes functional, including maintaining a known validator set, should not count as essential managerial efforts, otherwise every routine maintenance cycle could restart the securities analysis. The fourth request is a safe harbor for technology roadmaps, letting issuers keep iterating on their networks without re-triggering the securities analysis.

Circle also emphasized technology neutrality, citing the permissionless network Arc as offering potential for scale and network security, and asked the SEC to clarify how different permissionless network structures should be treated. The company operates both its own Arc network and a compliant stablecoin system, so the letter is effectively paving the way for “onchain capital formation”: if stablecoins can be treated as cash and brokers are willing to hold them, then tokenized securities issuance and trading settled in USDC get institutional-grade infrastructure.

Why “Cash” Is So Valuable: Status Determines Cost of Capital

Classifying stablecoins as “cash” is not a word game. In the US broker-dealer net capital regime, haircuts on different assets directly determine capital charges: cash-equivalent assets carry zero haircut, while a 2% haircut on crypto assets means that for every $100 million of stablecoins held, a broker must set aside an extra $2 million of capital. At institutional scale, that number reaches the P&L level, and it is a major reason brokers have been reluctant to take large-scale stablecoin settlement. Circle’s substantive ask is to trade the GENIUS Act compliance framework (100% reserves, regular attestations, state or federal charter) for “cash” status in the securities system, wiping the capital charge off the balance sheet.

The third and fourth requests target the mechanical gaps in the Rule 400 safe harbor. Under the proposal, once an issuer files Form TR certifying that its essential managerial efforts are complete, the investment contract stops being a security; but the boundary of “essential managerial efforts” is undefined. If maintaining a known validator set or shipping version upgrades counts as essential managerial efforts, then a network that has already “graduated” could be pulled back into securities classification with every routine maintenance. Circle’s logic is direct: technical services after launch are operations, not entrepreneurial promises, and should not affect an already-completed safe harbor determination. The technology roadmap safe harbor is designed to prevent the perverse incentive of “issuers stopping iteration to avoid restarting securities analysis.”

The timing of the letter is also deliberate: October 20 was the comment deadline, after which the SEC moved into final rule drafting. The SEC currently has only two commissioners, Atkins and Uyeda, and final adoption requires both to agree. After the CLARITY Act failed 49-50 on September 15, Reg Crypto Assets became the most important vehicle for the US crypto-asset offering framework, while the GENIUS Act’s stablecoin framework (OCC has finalized its rule, with full effect on January 18, 2027) runs in parallel. Circle’s demand is essentially that the SEC graft another statute’s compliant products directly into the securities rulemaking. Stablecoin status would no longer be determined by the SEC itself, but by GENIUS Act compliance.

PwC Report: The Rulebook Is Written, Architecture Debt Arrives

On October 29, PwC released the fifth edition of its Global Crypto Regulation Report 2027, covering licensing, stablecoin and Travel Rule status across more than 30 jurisdictions. The report’s core finding echoes Circle’s letter: the rulebook phase of global crypto regulation is largely complete, and the 2027 competitive focus shifts to “financial architecture.” Whether regulation, supervision and market infrastructure can support digital assets at scale becomes the new dividing line.

The report introduces a new institutional test of regulatory maturity: can a transaction work end to end, from issuance and settlement through to collateral use, cross-border transfer and recovery? A licence provides market access, but institutional scale also depends on reliable legal title, usable settlement money, collateral mobility and workable cross-border access. The report coins “regulatory architecture debt”: the accumulated cost and risk of leaving legal and operational connections unresolved as digital financial activity grows. Its five propositions for 2027: rulebooks can converge before markets connect; settlement becomes the binding constraint; existing law becomes increasingly decisive; domestic permission outpaces cross-border use; and automation moves the point of control.

Across key markets, the EU’s anchor is MiCAR authorization and passporting, layered with the DLT Pilot Regime and the Eurosystem’s Pontes settlement solution that went live in September; the US provides a statutory framework for payment stablecoins through the GENIUS Act; the UK’s FCA authorization gateway is open ahead of the new regime starting October 25, 2027; and the UAE’s CBUAE payment-token framework sits alongside distinct virtual-asset and free-zone regimes. PwC also flags two emerging questions: tokenized equities and perpetual derivatives referencing traditional assets, plus accountability for autonomous and AI-enabled financial activity. Matt Blumenfeld, Global/US Digital Assets Lead at PwC US, put it most bluntly: “Rulemaking, for the most part, has been done, and that was the easier task. The question is no longer which jurisdiction wrote the most rules, but which regulatory systems are best positioned to support digital finance at scale.”

Read side by side, the logic chain between Circle’s letter and PwC’s report is clear. PwC says settlement money and custody architecture are the next constraints; Circle says stablecoins should be treated as cash. The former describes the problem, the latter proposes the solution. Circle’s four requests map precisely onto several of the institutional bottlenecks PwC identifies: settlement money (stablecoin = cash), cost of capital (haircut to zero), and network governance (defining essential managerial efforts). This is not coincidence; it is two sides of the same industry stage.

Takeaways for Practitioners

The Great Stablecoin Rewards Fight: France Takes on the ECB Over the Fate of the Euro Token

Four French financial authorities have jointly appealed to Brussels to allow third-party stablecoin rewards under safeguards, while the European System of Central Banks pushes for a wider ban. Competitiveness of the euro stablecoin and the principle that “e-money is for payments, not savings” collide head-on in the MiCA review window.

The French Four: Rewards Should Be Regulated, Not Prohibited

On October 20, the French Treasury (Direction generale du Tresor), the Financial Markets Authority (AMF), the Banque de France and the Prudential Supervision and Resolution Authority (ACPR) filed a joint response to the European Commission’s MiCA review with a clear position: stablecoin rewards “should be regulated rather than prohibited outright, as it tends to develop in any event.” This is the first time a member-state regulator has publicly opposed, at national level, the blanket ban advocated by the European System of Central Banks (ESCB).

The French proposal targets what MiCA defines as “indirect remuneration”: rewards paid by crypto-asset service providers or platforms for holding or using a token, returns earned by funds that hold e-money tokens, and returns linked to using them for settlement. The four authorities want the Commission to set four conditions, with the European Banking Authority (EBA) to flesh out the details: full disclosure of reward terms to holders, no promise of guaranteed returns, no marketing of rewards as savings products, and continuous supervisory monitoring of the effect on bank deposits.

France does not waver on one line: e-money token (EMT) issuers themselves must remain barred from paying interest. The reasoning matches the ESCB’s. Remunerated tokens would drain bank deposits and turn a settlement asset into an investment product. The real split is over third-party rewards. France’s case points straight at competitiveness. Indirect remuneration “objectively lowers the cost of holding EMTs and can thereby support the 24/7 extension of financial services,” while “an EU framework stricter than its main competitors could weaken the position of euro-denominated EMTs.” That sentence is aimed squarely at the United States.

France’s reference point is precisely the US GENIUS Act, which bars issuers from paying interest but does not ban third-party rewards. The OCC’s implementing rules, finalized on October 21 and effective January 18, 2027, leave the question of which payments count as prohibited yield to a fact-specific assessment, effectively leaving room for third-party rewards. Circle’s USYC fund and OUSD’s reserve-income split are US products built on exactly this dividing line.

The ESCB: E-Money Is for Payments, Not Savings

A month earlier, in September, the European System of Central Banks (ESCB, including the ECB and the 27 national central banks) submitted a MiCA review response pointing in the opposite direction. The ESCB not only wants to keep the issuer-interest ban; it wants the prohibition extended to indirect rewards, including loyalty benefits, fee waivers and DeFi liquidity-mining incentives, and to unregulated crypto borrowing, lending and staking beyond MiCA’s current scope. The core argument is one sentence: “electronic money is intended to be used for making payments and not as a means of saving.”

The split is exquisitely awkward: the Banque de France, which signed the French document, is itself a member of the ESCB. The French Treasury’s notice presents the paper as a joint national position, meaning the country is at odds with the central-bank system it belongs to. Paris and Frankfurt give opposite answers to the same question. The banking industry’s stance is understandable: commercial banks worldwide are fighting stablecoin rewards, claiming the tokens could drain trillions from deposits. Yet European banks are moving in themselves. HSBC has launched its first stablecoin for 3.3 million users in Hong Kong, China, while dozens of major European banks are building a shared euro stablecoin through the Qivalis consortium.

Beyond Yield: The Split Runs Just as Deep on Reserves and Scope

France’s position on reserves is even more aggressive than on yield. The current requirement that e-money institutions hold 30% to 60% of reserves in bank deposits is rated “not at all appropriate” by the four authorities, which propose daily and weekly liquidity ratios, maturity limits and counterparty diversification instead, in line with the GENIUS Act’s reserve design. The ESCB also supports replacing the deposit floor with liquidity buckets, so on reserves the two positions are close, and the real fissure is over rewards. France also wants to limit MiCA’s scope to euro tokens offered or traded in the EU, which would let issuers abroad issue in euros without full EU authorization, arguing that the current rule deters issuance in euros. This aligns with the EBA’s October 14 designation of USDC as the first “significant e-money token” in the EU (the first of 45 notified EMTs; from November 12 the EBA directly supervises own funds, reserves and liquidity). Regulation is simultaneously deciding which foreign tokens count and how much a domestic token can behave like money.

Across the Atlantic: Bessent Positions Stablecoins as “A Source of Treasury Funding”

Around the same time the French document landed, US Treasury Secretary Scott Bessent took the stage at Ripple Swell in New York on October 27 with a completely different picture. Bessent called the Senate’s failure to pass the CLARITY Act disappointing, but said the Treasury has “a lot of convening powers” and will work with the SEC and CFTC to fill the gap left by the legislative failure. He described the two agencies as “great partners” and said regulators can set “guardrails” so crypto companies do not get debanked.

More consequential is his stablecoin thesis: over 90% of stablecoins in circulation are pegged to the dollar, and issuers generally hold US Treasuries as reserves, so “every newly minted stablecoin effectively creates a buyer for government debt.” Bessent called stablecoins “an important source” of Treasury funding and compared the GENIUS Act to Lincoln’s National Currency Act of 1863, positioning the stablecoin framework as infrastructure for reshaping the dollar’s global standing. He framed US-China competition for financial influence as a technology race: “We will keep our military umbrella, but I think it becomes more and more a technology umbrella.”

Put the two threads together and the global stablecoin regulatory map is clear. Washington treats stablecoins as amplifiers of dollar hegemony, applying a layered approach to yield (issuer interest banned, third-party rewards free). Frankfurt treats stablecoins as a threat to the deposit system, wanting indirect rewards sealed off too. Paris, an ESCB member that also sees itself as the gatekeeper of euro stablecoin competitiveness, tries to carve a conditional middle path. How three cities answer the same question will directly determine the relative position of euro-denominated EMTs and dollar stablecoins in the EU market over the next two years.

The market impact is immediate. After the French position became public, more than 50,000 EU citizens emailed the European Commission through industry groups, urging it to allow regulated stablecoins to offer rewards and cashback. MiCA Article 140 requires the Commission to report by June 30, 2027, and it may include a legislative proposal. Amending Article 50 (the interest ban) will be the first legislative battleground.

Key Takeaways for Practitioners