Author: Jae, PANews
The implementation of the Genius Act has laid the groundwork for a transformation in U.S. cryptocurrency regulation, as the crypto market recently wanders through a downturn while regulators quietly deliver favorable developments to the market.
For a long time, crypto assets have remained outsiders on the fringes of “semi-legality” within the traditional financial system, with regulatory ambiguity and stringent capital requirements creating a triple challenge for institutional investors: “dare not enter, cannot use, hard to navigate.”
Recently, the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the New York Stock Exchange (NYSE) simultaneously, within a narrow time window, systematically "deregulated" crypto assets—from the underlying asset discount rate, to mid-layer collateral efficiency, to high-layer risk hedging tools—opening the door for crypto assets to enter mainstream capital markets.
Stablecoins have become "quasi-cash" assets, increasing capital efficiency by 50 times.
Within the framework of traditional securities regulation, the SEC's Rule 15c3-1 (Net Capital Rule) serves as a cornerstone for market stability. This rule requires broker-dealers to maintain sufficient high-liquidity assets to cover their operational risks.
Before the Genius Act took effect, stablecoins occupied an awkward position within this regulatory framework, serving merely as a visible but unusable asset on traditional financial institutions' balance sheets.
Due to their ambiguous legal status, broker-dealers often apply a 100% "haircut" when calculating net capital, meaning that $100 million in stablecoins held by a broker-dealer is viewed as having zero value under regulatory rules, directly extinguishing institutional interest in using stablecoins as trading positions or settlement instruments.
In February, the SEC’s Division of Trading and Markets released a new FAQ that broke this deadlock, stating that if broker-dealers hold “payment stablecoins” that meet specific criteria under the Genius Act, they can be considered to have a “ready market,” reducing the required capital discount to just 2%.
This means that $100 million in stablecoins can now generate $98 million in net capital capacity, increasing capital efficiency by 50 times.
More importantly, this adjustment elevates the regulatory status of payment stablecoins to the same "quasi-cash" category as money market funds and short-term U.S. Treasuries. The SEC has opened the door to the traditional financial system for compliant stablecoins with a 2% discount rate.
In the long term, a 2% discount can not only enhance brokers' willingness to adopt, but may also attract insurers and corporate finance departments facing similar regulatory requirements to allocate stablecoins as liquidity reserves.
However, the systemic contagion risk of de-pegging is the hidden reef behind the SEC’s 2% discount rate—a rate predicated on the absolute safety of the stablecoin’s reserve assets.
If the underlying U.S. Treasury settlement system fails or reserve banks face operational risks causing the stablecoin to depeg, it will directly impact the net capital adequacy ratio of holding institutions—for example, Silicon Valley Bank’s collapse once caused USDC to depeg significantly to $0.90.
The depegging risk of stablecoins was previously confined to the industry, but it may now be imported back into the traditional banking system, creating systemic risk across markets.
BTC/ETH join compliant collateral, unlocking arbitrage liquidity
Last week, following the joint release of new cryptocurrency guidelines by two major regulators and the SEC's approval of a tokenized stock trading pilot program on Nasdaq, the CFTC further clarified requirements for futures commission merchants (FCMs) on March 22 through an FAQ.
Related reading: Milestone guidance arrives: SEC and CFTC join forces, bringing an end to the “everything is a security” era in crypto
Based on the above, if the SEC's rules address the issue of brokers "holding" stablecoins, then the CFTC's new pilot rules on crypto collateral answer how futures markets can "use" crypto assets.
When FCMs accept BTC and ETH as margin, a 20% capital charge must be applied. In simple terms, when a hedge fund client deposits $1 million worth of BTC or ETH as margin for a futures position, the FCM must set aside $200,000 of its own capital to hedge the risk.
The launch of this pilot grants BTC/ETH the status of "eligible collateral" at the federal level. Although the 20% ratio remains higher than that of traditional commodities, it is a crucial element for unlocking liquidity for institutional investors.
Previously, institutions had to convert BTC/ETH into fiat currency to participate in regulated crypto futures trading. This cross-market conversion step increased transaction costs and narrowed arbitrage windows. The CFTC’s new pilot rule allowing crypto assets as “native collateral” directly eliminates this friction, enabling smoother cross-market arbitrage capital flows and enhancing asset interconnectivity.
More significantly, this rule makes the 24/7 settlement advantage of crypto assets practically viable. Traditional collateral such as government bonds relies entirely on banking hours, whereas BTC/ETH on-chain transfers operate around the clock—especially during weekends when traditional financial markets are closed but crypto markets may experience sharp volatility, allowing institutions to instantly replenish margin and significantly reduce the risk of liquidation.
The United States is using crypto assets as a testing ground to build a continuously operating capital market. If the 24/7 collateralization model for BTC/ETH succeeds, this mechanism could eventually be extended to tokenized trading of U.S. Treasuries and stocks.
However, the risk of procyclicality is also embedded in the CFTC’s 20% capital requirement. While this ratio is sufficiently prudent in traditional markets, rapid declines in collateral value during extreme crypto market crashes can trigger concentrated margin calls.
The high correlation among crypto assets can create a "liquidation spiral": forced liquidations of collateral lead to further price declines, triggering more margin calls, with intensity potentially far exceeding that of traditional markets.
NYSE eliminates options position limits, ushering in the era of institutionalization
The final piece of the liquidity puzzle has fallen into place in the options trading space.
NYSE Arca and NYSE American, subsidiaries of the New York Stock Exchange, have amended their rules to eliminate the 25,000-contract position limit for BTC and ETH spot ETF options. This change has transformed加密ETF options in the eyes of institutional investors from “nearly unusable” to “highly viable.”
Previously, a limit of 25,000 contracts was like a tight rein on crypto ETF options for institutions that routinely make large-scale asset allocations.
The NYSE has elevated the regulatory status of crypto ETF options to match that of established commodity ETF options such as gold and crude oil, by amending Rule 6.8-O and other provisions, removing specific hard caps and instead regulating them under general commodity trust option rules.
The NYSE's move prompted similar actions from its peers. Nasdaq has also submitted a comparable rule amendment application, planning to increase the open interest limit for IBIT options to 1 million contracts, with the ultimate goal of eliminating the limit entirely.
Canceling the futures limit will have secondary effects.
The first priority is the activation of market makers. During the quota period, market makers were hesitant to provide deep order books for crypto ETF options due to concerns about crossing regulatory boundaries. With the quota removed, market makers can now establish sufficiently large hedging positions, enabling them to offer narrower bid-ask spreads and attract more large institutional participants.
Secondly, volatility management. Options will provide a more granular price discovery mechanism, and increased options trading volume can help stabilize the spot market. When the market experiences a one-sided decline, institutions can lock in risk by purchasing large-scale put options without having to sell in the spot market, thereby alleviating downward pressure on the market.
In contrast, the removal of the NYSE crypto ETF options limit may bring risks of oligopoly and market manipulation. While lifting the limit provides convenience for institutions, it also grants major hedge funds significant market influence.
These institutions can indirectly manipulate spot prices through large options positions, and it remains uncertain whether current market surveillance software is sufficient to address this new form of cross-product manipulation.
According to PANews, the three policies from the SEC, CFTC, and NYSE are not operating in isolation but instead form a tightly integrated internal logic, collectively establishing a liquidity cycle for crypto assets within the U.S. financial system.
The capital efficiency loop extends from backend reserves to frontend derivatives.
When the SEC allows stablecoins to be held at a 2% discount, institutional balance sheets will become “lighter and more flexible,” unlocking significant idle capital; this capital can then be deposited as margin at futures exchanges in the form of BTC/ETH under the CFTC’s new collateral pilot rules; and the price risk associated with these futures positions can be hedged through the NYSE’s unrestricted options market.
With optimizations based on collateral discounts and options limits, the cost of cross-market arbitrage will decrease. The spot prices of BTC/ETH, futures premiums, and options volatility will become more closely correlated, enhancing market pricing efficiency.
This interconnected regulatory framework ensures that cryptocurrency asset flows no longer rely on opaque offshore platforms, but are instead continuously monitored in real time by the SEC and CFTC.
However, it is important to be aware that large-scale institutional entry may place retail investors at a greater disadvantage in market competition.
A series of actions by U.S. financial regulators signal that crypto assets are entering the mainstream.
Stablecoins have evolved from transactional lubricants to components of institutional balance sheets; BTC and ETH have transitioned from alternative investment assets to eligible collateral in mainstream derivatives markets; the crypto market has shifted from being an outsider to the traditional financial system to becoming one of the key participants in liquidity restructuring.
As cryptocurrency assets become deeply integrated with traditional finance, regulatory focus will expand beyond fraud prevention and anti-money laundering to include broader systemic risk management.
As SEC Chairman Paul Atkins said: The role of regulators is to draw clear lines. And today, those lines are moving toward a more prudent and clearer direction.