US defense bill may be ‘problematic’ for USDC and stablecoins: Analysts
Circle’s USD Coin (USDC) and other stablecoins could potentially face a compliance nightmare if a new national defense bill that passed in the United States Senate makes it all the way.
In a July 31 investment note seen by Cointelegraph, Berenberg analyst Mark Palmer explained that a recent amendment to the 2024 National Defense Authorization Act (NDAA), could potentially introduce new KYC and anti-money laundering measures that stablecoin issuers will be unable to comply with.
“The amendment would require the U.S. Treasury Secretary to ‘establish examination standards for crypto assets’ that would help regulators to ensure compliance with money laundering and sanctions laws,” wrote Palmer, adding:
Palmer explained that the identities of stablecoin holders can only be determined when the asset is issued and redeemed. “Such an outcome would likely cause further deterioration in USDC’s market cap,” he warned.
In recent months, USDC’s market cap has been on the decline, falling $17.5 billion — roughly 39% — since March 5.
While this could be a significant setback for Circle, it could also prove problematic for Coinbase, said Palmer, noting the exchange “derived 27% of its net revenue from interest income on USDC” in the first quarter of this year.
Since the beginning of the year, Coinbase shares have drastically outperformed the traditional equities market, surging 170% from a price of $33 on Jan.1 to $98.61 at the time of publication.
According to Berenberg, there were two main reasons for this outperformance. The first was the favorable ruling handed down to Ripple Labs and the second was the flurry of filings for spot Bitcoin ETFs from major institutions such as BlackRock and Fidelity.
Related: Coinbase denies SEC told
Read more on cointelegraph.com
