The proposed U.S. national defense bill may bring a compliance dilemma for stablecoins like USDC and others. Analysts predict a somewhat ‘problematic’ future, as the bill could introduce an array of Know Your Customer (KYC) and anti-money laundering (AML) measures that these issuers might find challenging to comply with.
According to Berenberg analyst Mark Palmer, the amendment to the 2024 National Defense Authorization Act indicates the U.S. Treasury Secretary’s mandate to establish regulatory standards for crypto assets. These standards aim to ensure compliance with money laundering and sanctions laws. The potential hurdle is that these measures might be infeasible for stablecoin holders as their identities only come into play when the asset is both issued and redeemed. The potential implications would for sure have an impact on USDC’s market cap.
Palmer’s analysis sheds light on the coin’s market cap that has seen a notable descend in the past few months. It plunged approximately 39%, equivalent to $17.5 billion since March 5. Given these circumstances, the defense bill, if it becomes a law, could cause a further deterioration in USDC’s market cap.
The stablecoin scenario has its tentacles reaching out to other quarters of the crypto market as well. As per Palmer, the proposed bill could pose problems for Coinbase, given that the platform derived nearly 27% of its net revenue from interest income on USDC in Q1 2021.
Coinbase’s situation turns out to be even more intriguing because of two main reasons: the favorable ruling passed to Ripple Labs and a surge of filings for spot Bitcoin ETFs from major institutions like BlackRock and Fidelity. Both served as bullish indicators for Coinbase, but SEC Chair Gensler’s recent comments induce a moderate degree of skepticism.
Gensler, in a recent interview with Bloomberg, indicated that crypto investors should not necessarily assume that cryptocurrencies do not come under the SEC’s radar. In addition, his sober response to a question concerning Bitcoin ETF applications implied opposition to their approvals.
Despite the uncertainty clouds hovering above Coinbase, Berenberg maintains its ‘hold’ rating for Coinbase stock. Notwithstanding its wavering future, the company’s substantial balance of cash and counterparts ensures the financial longevity of the company.
Source: Cointelegraph
