US defense bill may be problematic for USDC and stablecoins: Analysts

Circle’s USD Coin (USDC) and different stablecoins may doubtlessly face a compliance nightmare if a new national defense bill that passed in the US Senate makes all of it the best way.

In a July 31 funding notice seen by Cointelegraph, Berenberg analyst Mark Palmer defined {that a} latest modification to the 2024 Nationwide Protection Authorization Act (NDAA) may doubtlessly introduce new Know Your Customerand Anti-Cash Laundering measures that stablecoin issuers shall be unable to adjust to.

“The modification would require the U.S. Treasury Secretary to ‘set up examination requirements for crypto property’ that may assist regulators to make sure compliance with cash laundering and sanctions legal guidelines,” wrote Palmer, including:

“We consider this modification, if it stays within the remaining model of the NDAA, could possibly be problematic.”

Palmer defined that the identities of stablecoin holders can solely be decided when the asset is issued and redeemed. “Such an end result would seemingly trigger additional deterioration in USDC’s market cap,” he warned.

In latest months, USDC’s market cap has been on the decline, falling $17.5 billion — roughly 39% — since March 5.

Knock on results for Coinbase

Whereas this could possibly be a big setback for Circle, it may additionally show problematic for Coinbase, mentioned Palmer, noting the trade “derived 27% of its web income from curiosity revenue on USDC” within the first quarter of this 12 months.

For the reason that starting of the 12 months, Coinbase shares have drastically outperformed the normal equities market, surging 170% from a worth of $33 on Jan. 1 to $98.61 on the time of publication.

In keeping with Berenberg, there have been two predominant causes for this outperformance. The primary was the favorable ruling handed all the way down to Ripple Labs and the second was the flurry of filings for spot Bitcoin ETFs from main establishments similar to BlackRock and Constancy.

Associated: Coinbase denies SEC told it to delist everything but Bitcoin

The analysts famous that these two drivers of bullish exercise for Coinbase stand on shaky floor, as latest feedback from SEC Chair Gary Gensler have “poured chilly water on the first sources of the rally.”

In a July 28 interview with Bloomberg, Gensler mentioned crypto buyers shouldn’t assume that cryptocurrencies don’t fall beneath the purview of the SEC. Moreover, the analysts consider that Gensler’s tepid response to a query regarding Bitcoin ETF functions implied that he might oppose their approvals.

General, Berenberg maintained its “maintain” ranking for Coinbase inventory, noting that whereas there’s nonetheless “important uncertainty” for Coinbase sooner or later, its giant steadiness of money and equivalents gives “cushion and adaptability” in guaranteeing the monetary longevity of the corporate.

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