Crypto World
USDT Rare -$3B Signal Returns: Is Bitcoin Approaching Another Cycle Bottom?
TLDR:
- USDT 60-day market cap change has fallen below -$3B for only the second time in crypto market history.
- The first instance occurred in late 2022, aligning precisely with Bitcoin’s cycle bottom near the $16,000 level.
- Three single-day USDT outflows exceeding -$1B have each coincided with local bottoms or sharp Bitcoin volatility.
- Historical data shows Bitcoin entered strong recovery phases once USDT outflows stabilized after peak liquidity stress.
USDT is flashing a rare on-chain signal that has only appeared twice in crypto market history. The stablecoin’s 60-day market cap change has dropped below -$3 billion.
This level was last reached in late 2022, when Bitcoin bottomed near $16,000. That period marked one of the most severe liquidity contractions in the digital asset market.
Now, this same metric is triggering again in early 2026, with Bitcoin trading between $65,000 and $70,000.
USDT Outflows Mirror Patterns From the 2022 Cycle Bottom
The 60-day USDT market cap contraction has only breached -$3 billion on two occasions. The first came during the late 2022 market collapse, a period of forced selling and maximum fear.
The second is occurring now, in early 2026, after Bitcoin’s recent all-time high run.
On a daily basis, USDT has recorded three separate instances of single-day outflows exceeding -$1 billion. Each of those episodes lined up with either local market bottoms or sharp Bitcoin volatility clusters. That pattern is difficult to ignore given the current market conditions.
Analyst CrptosRus qouting MorenoDV_ flagged this development on X, noting the historical weight of the signal. “The 60-day Market Cap Change has dropped below -$3B, on only two occasions,” the post read. “The first occurred in late 2022, precisely as Bitcoin was carving its cycle bottom near $16K.”
Large-scale USDT redemptions at this rate typically reflect institutional or major holder exits from the broader crypto ecosystem.
Historically, these exits tend to cluster near exhaustion points rather than at the start of prolonged downtrends.
Liquidity Conditions Now Determine Bitcoin’s Next Move
Stablecoins function as the dry powder of the crypto market. When USDT supply grows, it points to fresh capital entering the ecosystem. When it contracts sharply, it reflects risk-off behavior, liquidity withdrawal, or forced redemptions.
For Bitcoin, a liquidity-sensitive asset, USDT supply trends carry measurable weight. The current 60-day contraction points to sustained capital outflows and structural tightening in crypto-native liquidity. That creates a fragile environment for price stability.
However, past cycles offer some useful context here. Once forced deleveraging completed and USDT flows stabilized, Bitcoin moved into strong medium-term recovery phases. The normalization of liquidity conditions preceded meaningful upside in prior cycles.
The current setup presents a conditional risk-reward scenario. If USDT contraction continues, downside pressure may extend further.
If flows flatten or reverse, the asymmetry shifts rapidly toward upside potential. Extreme liquidity stress has historically marked opportunity, but only once selling exhaustion is confirmed by stabilizing on-chain flows.
Crypto World
Bitcoin slides 5%, tumbling below $65,000 as whale selling grows and recent buyers lock in losses
On-chain data from Glassnode and CryptoQuant shows large holders dominating exchange inflows while short-term investors continue to sell at a loss, pointing to a fragile base-building phase.
Ethereum co-founder Vitalik Buterin has suggested using “transaction simulations” and other similar features to improve the user experience and security of Ethereum wallets and smart contracts.
In a post to X on Sunday, Buterin argued that security and user experience are not separate fields, as both revolve around user intent — ensuring protocols are doing what users intend them to do.
Buterin said an intent security approach could involve designing systems that double-check user actions, and could apply to Ethereum wallets and smart contracts, but also apply more broadly, such as operating systems and hardware.
“The user specifies first what action they want to take, and then clicks ‘OK’ or ‘Cancel’ after seeing a simulation of the onchain consequences of that action,” he said.
Other ways could include spending limits and multisig approvals, so execution only happens when the user’s intent, expected outcome, and risk limits all align, he said.
The result is that it should be easier to do low-risk things and harder to do dangerous things, Buterin said.
User intent is difficult to define
However, Buterin noted that defining user intent is “extremely complex” and part of the reason why there is no such thing as a “perfect security” solution:
“[It’s not] because machines are ‘flawed’, or even because humans designing the machines are ‘flawed’, but because ‘the user’s intent’ is fundamentally an extremely complex object that the user themselves does not have easy access to.”
“I would argue that the common trait of a good solution is: the user is specifying their intention in multiple, overlapping ways, and the system only acts when these specifications are aligned with each other,” he said.
Related: Starknet taps EY Nightfall to bring institutional privacy to Ethereum rails
Security is one of three components of the blockchain trilemma, along with decentralization and scalability.
The concept, coined by Buterin, theorizes that blockchains can optimize two of these aspects but must compromise on the other.
Decentralization and scalability have arguably been bigger focuses in the Ethereum ecosystem in recent years, particularly the latter, given that Ethereum’s mainnet has lagged in scalability compared to some of its biggest layer 1 competitors.
Magazine: IronClaw rivals OpenClaw, Olas launches bots for Polymarket — AI Eye
OpenClaw creator Peter Steinberger confirmed that any mention of Bitcoin or other cryptocurrencies on the project’s Discord server can lead to removal.
Summary
- OpenClaw enforces blanket ban on all crypto mentions in Discord.
- Rule follows $CLAWD scam that briefly hit $16M market cap.
- User banned for Bitcoin timing reference later reinstated.
A user was blocked Saturday for referencing Bitcoin block height as a timing mechanism in a multi-agent benchmark. This prompted Steinberger to defend the platform’s “no crypto mention whatsoever” policy.
The strict stance stems from a scam that happened during OpenClaw’s rebrand. When Steinberger received a trademark notice forcing a name change, scammers seized abandoned social media handles in the window between releasing old accounts and claiming new ones.
The attackers promoted a Solana-based token called $CLAWD that surged to approximately $16 million in market capitalization before collapsing over 90% after Steinberger publicly denied involvement.
User blocked for Bitcoin reference in technical discussion
The banned user shared their experience on X, explaining they were removed from OpenClaw’s Discord simply for mentioning Bitcoin block height in a technical context.
Steinberger responded that members had accepted “strict server rules” upon joining and that the community maintains a blanket ban on crypto mentions.
Steinberger later agreed to restore the user’s access, asking them to email their username so he could re-add them to the server.
The policy applies to all cryptocurrency references, not just promotional content or token discussions.
Technical use cases like block height timing mechanisms fall under the same ban as speculative token mentions.
$CLAWD token collapse triggered security crackdown
Trouble began when Steinberger received a trademark notice related to OpenClaw’s original name.
Scammers moved quickly to grab abandoned social media accounts during the transition, using them to promote the fraudulent $CLAWD token on Solana.
The token rocketed to roughly $16 million in market capitalization within hours as traders assumed it was an official OpenClaw launch.
Early buyers accused Steinberger of planning a pump-and-dump when the token collapsed more than 90% following his public denial of involvement.
Steinberger warned users he would never launch a cryptocurrency and that any token claiming association with him was fraudulent. The incident prompted the strict no-crypto policy now enforced across OpenClaw’s Discord channels.
Security researchers later identified hundreds of exposed OpenClaw instances online and dozens of malicious plugins, many designed to target crypto traders.
New Frontier Labs has joined forces with Bitgo Bank & Trust National Association to issue and custody the FYUSD stablecoin, a dollar-pegged token aimed at institutional buyers in Asia. The arrangement positions FYUSD as a regulated, cross-border instrument designed to meet U.S.-style standards while serving clients that require onshore custody and rigorous compliance. BitGo’s announcement underscores that the stablecoin will align with the GENIUS Act stablecoin regulatory framework, a blueprint that emphasizes 1:1 backing, AML and KYC controls, and robust oversight to simplify settlement for large, time-sensitive transactions. The collaboration also includes Fypher, a suite of stablecoin infrastructure tools that enables programmable settlement, potentially enabling autonomous AI agents to complete commercial transactions in real time.
Under GENIUS Act guidelines cited by BitGo, FYUSD must be backed 1:1 with cash deposits held by a custodian or by short-term U.S. government debt instruments. The framework is designed to harmonize stability with regulatory clarity, providing a pathway for institutions to adopt dollar-denominated digital assets without sacrificing compliance or risk controls. The emphasis on anti-money laundering (AML) and know-your-customer (KYC) requirements is intended to curb illicit finance while maintaining interoperability with mainstream financial rails. The official release frames FYUSD as a regulated, transparent instrument that could bridge traditional finance and crypto, particularly in markets where institutional access has been constrained or fragmented.
New Frontier Labs’ integration with BitGo Bank & Trust National Association also centers on governance and custody. BitGo will issue and provide custodial services for FYUSD, reinforcing the token’s custodial reliability for institutional counterparties. This arrangement aligns with BitGo’s broader mission to deliver regulated, insured custody and settlement infrastructure for digital assets, a backdrop that has become increasingly important as appetite for regulated stablecoins grows in Asia. The strategic focus is clear: deliver a compliant dollar-pegged instrument that can operate within existing legal regimes while offering the settlement efficiency that digital assets promise.
Beyond the immediate launch, the project appears to be leveraging a broader narrative around the dollar’s global settlement role. US Treasury officials have repeatedly highlighted stablecoins as a mechanism to preserve dollar dominance by shortening settlement times, reducing transaction costs, and expanding access to U.S. dollars for those outside traditional banking networks. The commentary reflects a wider policy conversation about how regulated stablecoins could complement, rather than replace, legacy financial rails while enabling faster, cheaper cross-border transfers. That framing sits alongside ongoing regulatory scrutiny and the push toward standardized, auditable frameworks that can accommodate institutional-scale usage.
As part of the ecosystem, the market backdrop for stablecoins remains sizable but nuanced. The total market capitalization of stablecoins stands at roughly $295 billion, according to data aggregators, after peaking above $300 billion late last year. The scale underscores how pivotal stablecoins have become for liquidity management, trading, and cross-border flows in both crypto-native and traditional markets. The dominance of USD-pegged tokens persists, with Tether’s USDt (USDT) leading the pack in market share. However, USDT has shown signs of shifting dynamics as redemptions accelerate. Circulating supply data indicate a decline that mirrors a broader pattern of investor repositioning, with February tracking a further drop after January’s $1.2 billion reduction. Market observers caution that such redemptions could signal a temporary contraction or broader reallocations, depending on macro conditions and regulatory clarity. Tether representatives have stressed that the data reflect near-term positioning rather than a new long-term trajectory.
In the context of Asia-focused stablecoin initiatives, the FYUSD development represents a notable case study in how custodial frameworks and regulatory guardrails can translate into practical, enterprise-grade tools for settlement and contracts. The inclusion of Fypher’s programmable settlement layer suggests a design where stablecoins can interact with automated processes and intelligent agents to streamline payments for complex transactions. While the technology promises efficiency gains, it also raises questions about governance, risk controls, and interoperability with existing payment rails. The conversation around autonomy, compliance, and settlement speed is ongoing, and the FYUSD project contributes a concrete implementation that could inform future standards for regulated digital dollars. (CRYPTO: USDT)
Stablecoins are down from the market cap peak of over $300 billion
The broader stablecoin market has cooled from its late-2023 exuberance. Current estimates place the aggregate market capitalization at about $295 billion, a pullback from the record-breaking levels touched when demand surged across DeFi and centralized finance channels. The slide is not uniform across tokens, but it underscores the sector’s sensitivity to regulatory developments, liquidity cycles, and shifting risk sentiment among crypto users and institutions alike.
Among the major players, USDt remains the largest stablecoin by circulation and market share, yet it has faced notable outflows in recent months. Data show a decline in the circulating supply during February after a similar trend in January, with analysts noting that the moves may reflect repositioning rather than a decisive vote against stablecoins. Tether has attributed the patterns to short-term positioning, emphasizing that the long-run trajectory remains a function of broader demand for on-chain dollar-denominated settlement and liquidity.
Despite the near-term fluctuations, the GTM narrative around regulated stablecoins continues to gain traction. The GENIUS Act framework, referenced in industry disclosures and coverage, remains a focal point for policymakers seeking to reconcile innovation with consumer protection and systemic resilience. The aim is to enable compliant, auditable stablecoins to operate at scale, including cross-border settlements and access for market participants who have been underserved by traditional financial services.
Market reaction and key details
Industry watchers are observing how Asia-facing stablecoins like FYUSD will interact with regional banking infrastructures, custody models, and regulatory expectations. The BitGo-led issuance approach signals a push toward standardized custody arrangements that can support institutional demand while maintaining rigorous controls on asset backing and settlement. The emphasis on 1:1 cash or U.S. government debt backing—paired with AML/KYC protocols—helps differentiate FYUSD from other market offerings that may not meet the same compliance bar. As Asia-based institutions weigh onboarding these assets, the question becomes whether standardized frameworks will accelerate adoption or trigger new layers of oversight.
What it means for users and developers
For users, the FYUSD initiative hints at more predictable settlement times and lower friction in cross-border transactions where a trusted dollar-pegged asset can reduce counterparty risk. For developers and builders, the Fypher toolkit introduces the possibility of programmable, policy-compliant settlement flows that can integrate with autonomous agents and automated processes. While the technical potential is substantial, it also demands robust risk management, governance, and clear auditing paths to satisfy institutional stakeholders and regulators alike.
Why it matters
The collaboration between New Frontier Labs and BitGo Bank & Trust National Association marks a meaningful step in the maturation of regulated, institution-friendly stablecoins in Asia. By aligning with the GENIUS Act framework, the initiative signals a preference for transparent reserves, verifiable backing, and comprehensive AML/KYC controls—factors that can lower the cost of capital for issuers and reduce settlement frictions for end users. The addition of Fypher reinforces the idea that stablecoins are evolving beyond simple token issuance into programmable settlement rails that can support more complex financial interactions, including those driven by AI-enabled systems.
Regulators have signaled a desire for standardized, auditable processes that can stand up to scrutiny as institutions increasingly participate in digital-dollar ecosystems. The market’s reaction will hinge on the degree to which such platforms can demonstrate resilience under stress scenarios, deliver on promised security guarantees, and maintain reliable liquidity even as conditions shift across macro, regional, and regulatory environments. In this sense, FYUSD serves as a test case for how a regulated framework can coexist with innovation, carving a path for future deployments that balance progress with accountability.
For investors and users, the development underscores a broader trend: the crypto ecosystem is moving toward regulated liquidity, with custodial credibility and transparent reserve practices becoming differentiators in a crowded space. If Asia-based institutions adopt FYUSD at scale, it could accelerate flows and provide a template for other regions seeking to reconcile digital-dollar issuances with established supervisory standards. The landscape remains dynamic, but the emphasis on backing, governance, and programmable settlement points to a future where regulated stablecoins play a central role in cross-border commerce and digital finance.
What to watch next
- Regulatory filings and confirmations of FYUSD backing and reserve composition (date TBD).
- Updates to Fypher’s programmable settlement features and integration with enterprise workflows.
- Adoption milestones in Asia, including onboarding of institutional clients and custody arrangements with BitGo.
- Formal reviews or audits of reserve holdings and AML/KYC compliance conducted by independent parties.
Sources & verification
- BitGo Named Issuer of FYUSD Bringing U.S.-Aligned Stablecoin Standards to Asia (Business Wire, February 20, 2026).
- GENIUS Act stablecoin regulatory framework overview (Cointelegraph).
- USDT circulating supply and market activity data (Artemis analytics; CoinMarketCap references).
- Stablecoins market capitalization data (RWA.XYZ).
- 21Shares taps BitGo for expanded regulated staking and custody support (Cointelegraph reference in related materials).
Crypto World
Dogecoin Hold Key Trendline for Sixth Day as Historical Profit Metric Hits All-Time High
TLDR:
- Dogecoin has tested a descending trendline across six consecutive daily candles without breaking below support.
- Analyst Trader Tardigrade warns that current momentum is weak and a volume spike is needed to confirm a breakout.
- Dogecoin’s Number of Days Spent at a Profit has surpassed 1,100 days, marking a first-ever reading for the asset.
- The 1,100-day metric shows most historical holders are at a loss, a level that often precedes long-term accumulation phases.
Dogecoin is drawing attention from analysts as two distinct market signals emerge simultaneously. The asset is holding a key trendline on the daily chart while posting a historic reading on a long-term cycle indicator.
Together, these developments are painting a complex picture for traders watching the market closely. The situation reflects both caution and structural interest in Dogecoin at its current price level.
Trendline Support Remains Intact but Momentum Raises Questions
Dogecoin has tested a descending trendline across six consecutive daily candles. Each test has so far resulted in the price holding above support.
Crypto analyst Trader Tardigrade noted that structure remains technically bullish under these conditions. However, the analyst also pointed out that the current price action appears to be running low on energy.
According to Trader Tardigrade, the move lacks the buyer conviction needed to confirm a genuine breakout. The analyst specifically called for a volume spike and strong conviction candles as confirmation signals.
Without those, the setup is considered more hopeful than reliable. The brakes, as the analyst described, are lightly tapped on any upward momentum.
Volume remains a critical factor in determining whether this trendline holds or breaks. Thin volume during a trendline test often leads to false signals in either direction.
Traders are advised to watch price behavior closely before committing to a directional position. A high-volume candle closing above resistance would carry more weight than multiple low-volume closes.
Until clear confirmation arrives, Dogecoin remains in a wait-and-see zone technically. The trendline holding is a positive sign, but it does not guarantee continuation.
The market requires participation from genuine buyers to shift the current dynamic. That participation has not yet shown up in a measurable way on the chart.
Historical Metric Hits Unprecedented Level for Dogecoin
On the on-chain side, Dogecoin has reached a notable milestone in a long-term cycle metric. Analyst Joao Wedson reported that Dogecoin has now accumulated more than 1,100 historical days where price traded higher than today’s level.
This is the first time the asset has reached this reading. The metric is called the Number of Days Spent at a Profit.
This indicator measures how many past trading days recorded prices above the current level. A higher reading reflects a longer history of trading at elevated prices compared to now.
It captures the aggregated positioning and memory of holders over time. This is a structural metric, not a short-term signal.
Wedson described the reading as a cycle-level development rather than a day-trading data point. It speaks to where Dogecoin sits relative to its entire price history.
More than 1,100 days of higher historical prices means a large portion of past holders are currently at a loss. That kind of data often precedes a longer-term accumulation phase in similar assets.
The combination of trendline support and this historical metric gives analysts two separate angles to monitor Dogecoin going forward.
The U.S. Securities and Exchange Commission’s staff provided regulatory clarity last week on how broker-dealers can treat stablecoin holdings for net capital purposes, allowing a 2% haircut rather than applying a full 100% deduction. The guidance appeared as an official posting in the SEC’s “Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology,” a living document used to address practical questions about handling crypto assets within traditional market infrastructure. The change comes after broker-dealers faced ambiguity about whether stablecoins—cryptocurrency tokens pegged to the US dollar—should count toward capital requirements. Commissioner Hester Peirce publicly welcomed the middle-ground approach, arguing a 100% haircut would be unduly punitive given the reserves backing these coins. The policy frames stablecoins more like cash-equivalents in balance sheets, a move that could unlock broader participation in tokenized securities and related crypto activities, without compromising the capital backbone of broker-dealers.
Key takeaways
- The SEC staff’s FAQ clarifies that broker-dealers may apply a 2% haircut to stablecoins when calculating net capital, reducing the capital impact compared with a full haircut.
- The guidance positions stablecoins closer to money-market-like instruments, linking their treatment to the reserves backing the tokens and their role in settlement rails.
- Illustratively, a broker-dealer holding $100 million in stablecoins could count $98 million toward net capital under the new guidance.
- Commissioner Peirce described the stance as measured, noting that a 100% haircut would be punitive relative to the underlying assets backing payment-stable coins.
- The development coincides with growing stablecoin traction in the United States, even as some officials question practical use cases and regulatory implications.
Tickers mentioned:
Sentiment: Neutral
Market context: The move reflects ongoing regulatory adjustments as stablecoins gain ground in US markets, spurred in part by recent legislation and ongoing debates about the role of crypto in mainstream finance.
Why it matters
The haircut clarification matters because it reduces the capital burden on broker-dealers that wish to hold and potentially utilize stablecoins in a broader set of activities, including trading and settlement of tokenized securities. By treating stablecoins more like cash equivalents, broker-dealers can allocate a portion of their stablecoin holdings toward capital requirements with a smaller drag on liquidity. That has implications for how these institutions manage risk, liquidity, and regulatory capital, potentially enabling more cost-effective participation in digital-asset markets.
From a risk-management perspective, the 2% haircut aligns with the notion that stablecoins mirror short-duration, high-quality reserve assets—the same logic used to justify the treatment of money market funds. The guidance thus reduces a prior barrier to using stablecoins for on-chain settlement and liquidity provisioning in tokenized markets. It also dovetails with industry commentary about stablecoins enabling more efficient cross-asset transactions and broader adoption of on-chain finance in mainstream trading desks.
“Stablecoins are essential to transacting on blockchain rails. Using stablecoins will make it feasible for broker-dealers to engage in a broader range of business activities relating to tokenized securities and other crypto assets.”
While the SEC clarification is a positive signal for market participants seeking clearer capital rules, it does not replace comprehensive regulatory rulemaking or policy debates. The guidance is a staff-level interpretation, not a formal amendment to net capital rules, meaning future adjustments could still occur as regulators evaluate risks, reserve adequacy, and systemic implications. Nevertheless, the response from industry observers has been to view the move as a meaningful step toward practical use-cases for stablecoins within regulated financial infrastructures.
Beyond the regulatory text, market dynamics around stablecoins have remained a focal point. Data tracked by RWA.XYZ shows a stablecoin market capitalization that has hovered in the high hundreds of billions, with fluctuations tied to sentiment, regulatory developments, and policy signals. The GENIUS stablecoin bill, signed into law in July 2025 by the US President, was widely seen as a landmark in digital-asset policy, spurring a surge in interest and activity around regulated stablecoin frameworks. The market cap climbed after the signing, reaching a reported peak above $300 billion in December 2025 and a current level around $295 billion. This trajectory illustrates how regulatory clarity and legislative actions can influence the adoption and liquidity of digital-asset primitives like stablecoins.
Yet not everyone in the policy community is sold on the immediate practical value of stablecoins. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, has dismissed broad utility claims for crypto and stablecoins, at least in the sense of everyday financial transactions. In a public remarks sequence, he questioned what advantage stablecoins offer beyond existing payment rails, a stance that underscores the ongoing debate about the real-world use cases for digital assets in the U.S. financial system. The tension between regulation that enables innovation and skepticism about the utility of crypto assets as payment instruments continues to shape the regulatory narrative.
The weekend chatter among industry observers and crypto-analysts highlighted the significance of the SEC’s clarification for market participants seeking to align risk controls with evolving capital requirements. The reaction on social platforms and among executives underscored that the guidance, while incremental, could unlock a more expansive role for stablecoins in large financial operations, particularly as broker-dealers explore new settlement mechanisms, collateral arrangements, and asset tokenization ventures. In a market where headlines can rapidly influence liquidity and pricing, even modest shifts in capital treatment can ripple through trading desks, liquidity pools, and balance sheet strategies across the traditional-crypto interface.
What to watch next
- Whether the SEC issues additional formal guidance or rules clarifying net capital treatment for other crypto assets beyond stablecoins.
- Broker-dealer adoption: how quickly institutions incorporate the 2% haircut guidance into internal risk models and capital planning.
- Regulatory dialogues around stablecoins’ reserve assets and disclosure standards, particularly in relation to the GENIUS framework and related legislation.
- Monitoring shifts in market liquidity and settlement activity as broker-dealers experiment with stablecoins for tokenized-securities trading and other crypto-asset workflows.
- Further public commentary from policymakers, including any updates on the perspectives of central banks regarding crypto-like payments and reserve structures.
Sources & verification
- SEC staff guidance: “Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology.” https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/frequently-asked-questions-relating-crypto-asset-activities-distributed-ledger-technology
- SEC Commissioner Hester Peirce speech on stablecoins and capital requirements: https://www.sec.gov/newsroom/speeches-statements/peirce-stablecoin-021926-cutting-two-would-do
- SEC staff clarification page referenced in coverage: https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/frequently-asked-questions-relating-crypto-asset-activities-distributed-ledger-technology
- RWA.XYZ stablecoins data: https://app.rwa.xyz/stablecoins
- Trump signs GENIUS stablecoin bill into law: https://cointelegraph.com/news/donald-trump-stablecoin-law-signed
- Associated Press video of the GENIUS signing: https://www.youtube.com/watch?v=FHD1G9UkCAU
- Marc Baumann LinkedIn post on the SEC guidance impact: https://www.linkedin.com/posts/marcphilippeb_%F0%9D%97%9D%F0%9D%97%A8%F0%9D%97%A6%F0%9D%97%A7-%F0%9D%97%9C%F0%9D%97%A1-the-sec-just-quietly-put-activity-7431070237011165184-oEfq?utm_source=share&utm_medium=member_desktop&rcm=ACoAAACDbMEBdyjl2O5sxzEsy9aglmivyOPP2qs
SEC clarifies 2% haircut rule for broker-dealers’ stablecoins
The publication of the SEC staff’s Frequently Asked Questions on crypto asset activities and distributed ledger technology marks a notable point in the ongoing evolution of regulatory clarity around digital assets used in traditional financial infrastructure. By allowing broker-dealers to apply a modest 2% haircut to their stablecoin holdings when calculating net capital, the staff provides a practical path forward for integrating stablecoins into regulated markets without forcing sharp, punitive reductions in capital buffers. The guidance explicitly references the Reserve- and asset-backed nature of stablecoins and positions these tokens as potential collateral and settlement assets that can support a broader spectrum of financial activities within the broker-dealer ecosystem.
In explaining the rationale, Peirce’s remarks emphasize the importance of avoiding unnecessarily punitive treatment that could hinder innovation. While the agency’s statement stops short of broad policy changes, it offers a concrete interpretive framework that market participants can incorporate into risk management, liquidity planning, and product development. The 2% haircut aligns with the conceptual approach of treating stablecoins similarly to money market instruments, which typically occupy a lower tier of capital risk in traditional finance. This alignment could lower barriers to using stablecoins as a practical tool in rapid settlement and collateralization for tokenized assets, potentially accelerating the adoption of blockchain-enabled workflows in regulated environments.
From a market perspective, the move arrives at a moment when the stablecoin sector has demonstrated resilience and growth, even as public officials debate the broader role of crypto assets in the financial system. The GENIUS law’s passage in mid-2025 and the subsequent market dynamics around stablecoins have illustrated both regulatory appetite for a clear framework and the continuing question of how these instruments will function alongside conventional payment rails. While some policymakers remain skeptical about the immediate utility of crypto-based payment methods—as reflected in cautious remarks by figures like the Federal Reserve’s Kashkari—the sector’s measured regulatory progress signals a potential for more defined, scalable usage in professional finance. As broker-dealers begin to implement and test the new haircut guidance, observers will watch for practical enrollment, risk controls, and any regulatory updates that accompany evolving supervision of digital assets.
Ethereum co-founder Vitalik Buterin has outlined a new framework for crypto security, offering practical strategies rooted in redundancy, multi-angle verification, and human-centric design.
He argues that the best way to protect users is to close the gap between their intent and system behavior.
Vitalik Buterin Explains Closing the Gap Between User Intent and System Security
Buterin’s insights, dismantling the idea of perfect security, arrive at a time when crypto platforms continue to face wallet hacks, smart contract exploits, and complex privacy risks.
By merging security with user experience, Buterin provides developers with a roadmap for balancing protection with usability.
Buterin reframes security as an effort to minimize the divergence between what users want and what systems do.
While user experience broadly addresses this gap, security specifically targets tail-risk scenarios in which adversarial behavior could lead to severe consequences.
“Perfect security is impossible—not because machines are flawed, or because humans designing them are flawed, but because the user’s intent is fundamentally an extremely complex object,” Buterin wrote.
He points out that even a seemingly simple action, like sending 1 ETH to a recipient, involves assumptions about identity, blockchain forks, and common-sense knowledge that cannot be fully encoded.
More intricate objectives, such as preserving privacy, add layers of complexity: metadata patterns, message timing, and behavioral signals can all leak sensitive information. This makes it difficult to distinguish between “trivial” and “catastrophic” losses.
The challenge mirrors early debates in AI safety, where specifying goals strongly proved notoriously difficult. In crypto, translating human intent into code faces a similar barrier.
Redundancy and Multi-Angle Verification
To compensate for these limitations, Buterin advocates redundancy: users specify intent through multiple overlapping methods. Systems act only when all specifications align.
This approach applies across Ethereum wallets, operating systems, formal verification, and hardware security.
For instance, programming type systems require developers to specify both program logic and expected data structures; mismatches prevent compilation.
Formal verification adds mathematical property checks to ensure code behaves as intended. Transaction simulations allow users to preview on-chain consequences before confirming actions.
Post-assertions require both action and expected outcomes to match. Multisig wallets and social recovery mechanisms distribute authority across multiple keys. This ensures that single-point failures do not compromise security.
The Role of AI in Security
Buterin also envisions large language models (LLMs) as a complementary tool, describing them as “a simulation of intent.”
Generic LLMs mirror human common sense, while user-fine-tuned models can detect what is normal or unusual for an individual.
“LLMs should under no circumstances be relied on as a sole determiner of intent. But they are one ‘angle’ from which a user’s intent can be approximated,” he noted.
Integrating LLMs with traditional redundancy methods could enhance mismatch detection without creating single points of failure.
Balancing Security and Usability
Critically, Buterin emphasizes that security should not translate into unnecessary friction for routine actions.
Low-risk tasks should be easy or even automated, while risky actions, such as transfers to new addresses or unusually large sums, require additional verification.
This calibrated approach ensures protection without frustrating users.
By blending redundancy, multi-angle verification, and AI-assisted insights, Buterin offers a roadmap for crypto platforms to reduce risk while maintaining usability.
Perfect security may be unattainable, but a layered, human-centered approach can safeguard users and strengthen trust in decentralized systems.
Bithumb CEO admited past mistakes following the latest 620,000 BTC blunder which has prompting further investigations into system flaws.
South Korea’s financial authorities are facing criticism after failing to spot major flaws in Bithumb’s systems that led to an unprecedented Bitcoin error.
Despite repeated inspections by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), a vulnerability remained that allowed a single employee to trigger massive coin transfers without detection.
Bithumb Crypto Mishap
According to Rep. Kang Min-guk of the People Power Party, the FSC reviewed Bithumb once in 2022 and twice in 2025, while the FSS carried out three inspections during the same period. Despite this, none identified discrepancies between actual holdings and accounting records.
On February 6, a promotional event went wrong when users were mistakenly credited with 2,000 BTC each instead of coins worth 2,000 won (worth approximately $1.38). This error caused the system to register a total of 620,000 bitcoins being “distributed” to users, which is far more than the exchange’s actual holdings of about 42,800 BTC.
As reported by The Korea Times, the country’s lawmakers said the mistake exposes deeper weaknesses in internal controls, ledger management, and regulatory supervision. Rep. Han Chang-min of the Social Democratic Party questioned whether regulators’ inspections were largely procedural and noted attempts to place responsibility on Bithumb.
The FSS has extended its probe through February and is investigating potential violations involving investor protection, anti-money laundering (AML), and system flaws.
Bithumb CEO Lee Jae-won acknowledged two smaller prior errors that were recovered, which the FSS will also review.
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Meanwhile, an emergency team from the authorities and the Digital Asset eXchange Alliance (DAXA) is reviewing asset verification and internal controls at some of the country’s other prominent exchanges, such as Upbit, Coinone, Korbit, and GOPAX. Results are expected to influence both DAXA’s self-regulatory rules and future crypto legislation.
Lost and Found
The latest setback comes a month after the Gwangju District Prosecutors’ Office reported that Bitcoin seized in a criminal case had gone missing, but authorities have now recovered all 40 billion won worth of the lost cryptocurrency. Prosecutors said the 320.8 bitcoins were returned from the hacker’s electronic wallet to the office’s wallet on February 17, apparently voluntarily, after the hacker was unable to cash them out.
The coins had originally been confiscated from the daughter of a couple arrested for operating an illegal overseas gambling site worth 390 billion won between 2018 and 2021, who had converted their criminal proceeds into Bitcoin. Officials said the BTC were lost last August when prosecutors accidentally accessed a phishing site while checking the wallet, which exposed the funds.
Authorities have been tracking the hacker and monitoring domestic and international exchanges to prevent further losses.
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The idea that Layer 1 blockspace has become a commodity may be premature, according to Bitwise CIO Matt Hougan, who argues that institutional behavior tells a very different story.
Hougan pushed back on what he described as an “increasing view in crypto that L1 blockspace is a commodity.
Institutional Capital Clusters on Top-Tier Chains as On-Chain Prediction Markets Redefine Information Edge
According to the Bitwise executive, if infrastructure were truly commoditized, capital and development would be evenly distributed across chains.
Instead, the vast majority of institutional building is taking place on very few chains (Ethereum, Solana, etc.).
“…basically, zero interest in building on the twentieth largest L1,” he explained.
Networks like Ethereum and Solana continue to dominate mindshare, liquidity, and developer activity, even as newer Layer 1s compete aggressively on fees and throughput. Hougan offered a simpler explanation for today’s low-fee environment.
“Top-tier L1s built more bandwidth than the market can use at the moment, so fees are rock-bottom.”
However, he cautioned that the current equilibrium may not last.
“The real question is what happens when demand scales as stablecoins/tokenization/DeFi grow into the trillions,” he wrote. “I’m not sure we know the answer yet.”
If blockchain-based financial infrastructure expands to support trillions of dollars in tokenized assets and on-chain settlement, today’s excess capacity could quickly tighten. Such an outcome could potentially reshape the economics of leading networks.
Prediction Markets as a “Reg FD for the Internet Age,” Hougan Argues
Beyond infrastructure, Hougan also weighed in on another contentious topic: insider trading concerns surrounding crypto-based prediction markets.
“The insider trading worries about prediction markets are basically backwards,” he wrote. “Prediction markets are a markets-based extension of Reg FD, putting us all on a level playing field.”
Regulation Fair Disclosure (Reg FD) was designed to prevent selective disclosure of material information to favored investors.
Hougan argues that prediction markets extend that principle by publicly pricing probabilities around major events.
He reflected on how hedge funds historically extracted “alpha” during pivotal legislative moments in Washington, D.C., hiring lobbyists and consultants to gather private intelligence from Capitol Hill.
Today, however, retail investors can track live probabilities on platforms like Polymarket, including markets tied to the potential passage of legislation such as the Clarity Act.
“For liquid markets, those odds are probably as good or better than anything the lobbying complex can provide. It’s a more even playing field,” Hougan said.
He acknowledged that risks remain, citing the need to aggressively police insider trading in prediction markets. Still, he emphasized that the impact balance is dramatically positive and egalitarian.
Therefore, there are two debates here:
- Whether L1s are commoditized and
- Whether prediction markets enable unfair advantages
Both debates revolve around how power is distributed in financial systems. According to Matt Hougan, institutional concentration on top-tier chains reflects economic reality rather than pure commoditization.
Meanwhile, open prediction markets represent a rare instance where information asymmetry may actually be shrinking.
The US Securities and Exchange Commission (SEC) staff last week clarified that broker-dealers can apply a 2% “haircut” to their stablecoin holdings without objection from the SEC.
Previously, broker-dealers were uncertain whether to apply a 100% haircut to their dollar-pegged stablecoins, meaning that they did not count the tokens toward their net capital under existing regulations.
The clarification came in the form of a posting by the staff of the SEC’s Division of Trading and Markets as a “Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology.”
In response, Commissioner Hester Peirce said: In my view, a 100% haircut would be unnecessarily punitive given the underlying reserve assets that back payment stablecoins.”
The SEC requires broker-dealers to maintain minimum levels of net capital to meet financial obligations and absorb potential losses from market downturns and volatility, according to the staff’s clarification.
For example, if a broker-dealer holds $100 million in stablecoins, a 2% haircut allows them to count $98 million toward their net capital requirements. Celebrating the clarification as positive for the financial system, Peirce said:
“Stablecoins are essential to transacting on blockchain rails. Using stablecoins will make it feasible for broker-dealers to engage in a broader range of business activities relating to tokenized securities and other crypto assets.”
The clarification means broker-dealers can hold stablecoins without worrying about excess net capital requirements, and can treat the tokens similarly to money market funds, vehicles that hold low-risk cash equivalents like US Treasurys and certificates of deposit.
In a social media post over the weekend, Marc Baumann, CEO of crypto intelligence company 51, called the SEC staff communication “a big deal,” adding that “Wall Street can now actually hold and use stablecoins without destroying their capital ratios.”
Related: SEC leaders seek to clarify how tokenized securities interact with existing regulation
Stablecoins gain traction in the United States, but not all US officials are convinced
The stablecoin market cap recently hit a snag, falling by about $6 billion from the December 2025 peak of over $300 billion.
However, the market still has a $295 billion market cap, which has steadily grown since 2023, according to data from RWA.XYZ.
United States President Donald Trump signed the GENIUS stablecoin bill into law in July 2025, which was considered a landmark moment for the crypto industry.
The stablecoin market capitalization was just north of $252 billion at the time of signing and surged following the passage of the bill, according to data from RWA.XYZ.
Despite the meteoric surge in stablecoins and their implications for US dollar dominance in global financial markets, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, maintains that stablecoins and crypto have no real use cases.
“I could send any one of you $5 with Venmo, or PayPal, or Zelle, so what is it that this magical stablecoin can do? ” he said on Thursday.
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