--- title: "Circle asks the SEC to end the 2% haircut on USDC, which costs Wall Street $20 million per $1 billion" description: "The stablecoin issuer earns almost all its money from reserve interest, and falling rates are eating the growth. So Circle has asked the SEC to treat USDC like cash on Wall Street, and the quarter it reports Wednesday will show whether that lobby arrives in time." publisher: "The Inference" section: "Economy" published: 2026-11-02T18:08:22.660Z modified: 2026-11-02T18:08:22.660Z canonical: https://theinference.org/article/circle-asks-the-sec-to-end-the-2-haircut-on-usdc-which-costs-wall-street-20-million-per-1-billion language: en keywords: "Crypto, Stablecoins, Regulation, Circle, Earnings" --- # Circle asks the SEC to end the 2% haircut on USDC, which costs Wall Street $20 million per $1 billion > The stablecoin issuer earns almost all its money from reserve interest, and falling rates are eating the growth. So Circle has asked the SEC to treat USDC like cash on Wall Street, and the quarter it reports Wednesday will show whether that lobby arrives in time. [Circle](https://theinference.org/markets/companies/circle)'s whole business is the interest paid on the dollars behind USDC, its stablecoin. That business has a ceiling now: reserve income rose 5% to $668 million last quarter even as average USDC supply grew 25% year over year, because the return on reserves fell 66 basis points to 3.5% [2]. [Circle](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001876042) has responded by putting its growth plan in writing, to the SEC. ## The 2% haircut Circle wants gone In [an October 20 letter](https://cryptoslate.com/circle-wants-sec-to-erase-a-costly-wall-street-rule-holding-stablecoins-back/), followed by an October 28 statement, Circle asked the Commission to treat GENIUS Act-compliant payment stablecoins as cash in three places: securities fundraising, broker-dealer regulatory capital and customer reserve accounts [1]. The heavy lift is capital. Under SEC staff guidance updated in February, a broker-dealer takes a 2% haircut on qualifying stablecoin positions, so a $1 billion proprietary holding costs $20 million of net capital [1]. Circle wants that deduction gone, and wants Rule 15c3-3 clarified so USDC can sit in customer reserve accounts [1]. Wall Street holding USDC is new demand the interest rate cannot take away. ## The market is not waiting for the SEC [Morgan Stanley](https://theinference.org/markets/companies/morgan-stanley) [cut its price target on November 2](https://ca.investing.com/news/stock-market-news/morgan-stanley-cuts-circle-internet-group-stock-price-target-on-usdc-growth-concerns-93CH-4921327) citing USDC growth concerns [4], and the stock fell 9.31% on October 30 to $72.54, the steepest drop of the three crypto names reporting this week [2][5]. [Consensus for Wednesday's report](https://finance.yahoo.com/markets/crypto/articles/3-crypto-earnings-reports-watch-060000093.html) is EPS of $0.40, down 37.5% year over year, on revenue of $796.95 million [2]. *Chart: **Circle's revenue growth has fallen from 53% year over year to 6.6% in four quarters** Line chart of Circle quarterly revenue, Q3 2024 through Q2 2026, rising from $446M to $770M, with year-over-year growth slowing from 53% in Q2 2025 to 6.6% in Q2 2026.* *Circle's revenue growth has fallen from 53% year over year to 6.6% in four quarters [6]* ## Wednesday's report is a bet on the float The number that matters is USDC in circulation on September 30, because it sets the base for fourth-quarter reserve income [2]; it stood at $73.3 billion at the end of June [2]. The catch: the 2% haircut is nonbinding staff guidance, not a rule, so relief could arrive as a clarification, or never [1]. [Reserve income is 95.2% of revenue](https://www.tokenpost.com/news/business/46272) [3], so until Washington rules, Circle's earnings are a bet on the front end of the yield curve. Watch the September 30 USDC balance on November 4, and the SEC's docket after that [3]. ## Takeaway Circle earns 95% of its revenue from reserve interest, and falling rates are eating that. Its ask to the SEC to scrap Wall Street's 2% haircut on USDC is the growth plan; Wednesday's Q3 print shows whether it arrives in time. ## Sources 1. [CryptoSlate, Circle wants SEC to erase a costly Wall Street rule holding stablecoins back, 2 November 2026](https://cryptoslate.com/circle-wants-sec-to-erase-a-costly-wall-street-rule-holding-stablecoins-back/) 2. [BeInCrypto via Yahoo Finance, 3 Crypto Earnings Reports to Watch For First Week of November, 2 November 2026](https://finance.yahoo.com/markets/crypto/articles/3-crypto-earnings-reports-watch-060000093.html) 3. [TokenPost, Block and Circle Schedule Q3 Results as Riot Sets Earnings Call, 2 November 2026](https://www.tokenpost.com/news/business/46272) 4. [Investing.com/Reuters, Morgan Stanley cuts Circle Internet Group stock price target on USDC growth concerns, 2 November 2026](https://ca.investing.com/news/stock-market-news/morgan-stanley-cuts-circle-internet-group-stock-price-target-on-usdc-growth-concerns-93CH-4921327) 5. [MarketScreener/Reuters, Tether, Circle freeze $2.38 billion after Binance reports security incident, 29 October 2026](https://www.marketscreener.com/news/tether-circle-freeze-2-38-billion-after-binance-reports-security-incident-ce785fdade8cff27) 6. [Circle, quarterly figures from its SEC filings, retrieved 2 November 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001876042) --- Circle asks the SEC to end the 2% haircut on USDC, which costs Wall Street $20 million per $1 billion — The Inference. Canonical: https://theinference.org/article/circle-asks-the-sec-to-end-the-2-haircut-on-usdc-which-costs-wall-street-20-million-per-1-billion