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

Circle’s USD Coin (USDC) and different stablecoins may probably face a compliance nightmare if a new national defense bill that passed the USA Senate makes it into la.

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

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

“We imagine this modification, if it stays within the last model of the NDAA, may be problematic.”

Palmer defined that the identities of stablecoin holders can solely be decided when the asset is issued and redeemed. “Such an consequence would probably 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 might be a big setback for Circle, it may additionally show problematic for Coinbase, mentioned Palmer, noting the alternate derived 27% of its web income from curiosity revenue on USDC within the first quarter of this 12 months.

Because the starting of the 12 months, Coinbase shares have drastically outperformed the standard equities market, surging 170% from a value of $33 on Jan. 1 to $98.61 on the time of publication.

In accordance with Berenberg, there have been two major 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 corresponding 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 imagine that Gensler’s tepid response to a query regarding Bitcoin ETF purposes implied that he may oppose their approvals.

General, Berenberg maintained its “maintain” ranking for Coinbase inventory, noting that whereas there’s nonetheless vital uncertainty for Coinbase sooner or later, its massive stability of money and equivalents offers cushion and flexibility in guaranteeing the monetary longevity of the corporate.

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