A new national defense bill, which proposes tighter KYC and AML requirements on stablecoins, could spell trouble for Circle’s USDC, Coinbase and stablecoin issuers.
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 , 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.
Overall, Berenberg maintained its “hold” rating for Coinbase stock, noting that while there is still “significant uncertainty” for Coinbase in the future, its large balance of cash and equivalents provides “cushion and flexibility” in ensuring the financial longevity of the company.
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