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

Circle’s USD Coin (USDC) and different stablecoins could perchance look a compliance nightmare if a new nationalist defence measure that passed successful the United States Senate makes it each the way.

In a July 31 concern enactment seen by Cointelegraph, Berenberg expert Mark Palmer explained that a caller amendment to the 2024 National Defense Authorization Act (NDAA) could perchance present caller Know Your Customerand Anti-Money Laundering measures that stablecoin issuers volition beryllium incapable to comply with.

“The amendment would necessitate the U.S. Treasury Secretary to ‘establish introspection standards for crypto assets’ that would assistance regulators to guarantee compliance with wealth laundering and sanctions laws,” wrote Palmer, adding:

Palmer explained that the identities of stablecoin holders tin lone beryllium determined erstwhile the plus is issued and redeemed. “Such an result would apt origin further deterioration successful USDC’s marketplace cap,” helium warned.

In caller months, USDC’s marketplace headdress has been connected the decline, falling $17.5 cardinal — astir 39% — since March 5.

Knock connected effects for Coinbase

While this could beryllium a important setback for Circle, it could besides beryllium problematic for Coinbase, said Palmer, noting the speech “derived 27% of its nett gross from involvement income connected USDC” successful the archetypal 4th of this year.

Since the opening of the year, Coinbase shares person drastically outperformed the accepted equities market, surging 170% from a terms of $33 connected Jan. 1 to $98.61 astatine the clip of publication.

Coinbase banal year-to-date terms chart. Source: TradingView

According to Berenberg, determination were 2 main reasons for this outperformance. The archetypal was the favorable ruling handed down to Ripple Labs and the 2nd was the flurry of filings for spot Bitcoin ETFs from large institutions specified arsenic BlackRock and Fidelity.

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

The analysts noted that these 2 drivers of bullish enactment for Coinbase basal connected shaky ground, arsenic caller comments from SEC Chair Gary Gensler person “poured acold h2o connected the superior sources of the rally.”

In a July 28 interview with Bloomberg, Gensler said crypto investors shouldn’t presume that cryptocurrencies bash not autumn nether the purview of the SEC. Additionally, the analysts judge that Gensler’s tepid effect to a question concerning Bitcoin ETF applications implied that helium whitethorn reason their approvals.

Overall, Berenberg maintained its “hold” standing for Coinbase stock, noting that portion determination is inactive “significant uncertainty” for Coinbase successful the future, its ample equilibrium of currency and equivalents provides “cushion and flexibility” successful ensuring the fiscal longevity of the company.

Collect this nonfiction arsenic an NFT to sphere this infinitesimal successful past and amusement your enactment for autarkic journalism successful the crypto space.

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