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 Know Your Customerand 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:
“We believe this amendment, if it remains in the final version of the NDAA, could be problematic.”
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.
Knock on effects for Coinbase
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 it to delist everything but Bitcoin
The analysts noted that these two drivers of bullish activity for Coinbase stand on shaky ground, as recent comments from SEC Chair Gary Gensler have “poured cold water on the primary sources of the rally.”
In a July 28 interview with Bloomberg, Gensler said crypto investors shouldn’t assume that cryptocurrencies do not fall under the purview of the SEC. Additionally, the analysts believe that Gensler’s tepid response to a question concerning Bitcoin ETF applications implied that he may oppose their approvals.
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.
Hall of Flame: Wolf Of All Streets worries about a world where Bitcoin hits $1M
Sir Keir Starmer has said the next election will be an “open fight” between Labour and Reform UK.
The prime minister, speaking at a conference alongside the leaders of Canada, Australia and Iceland, said the UK is “at a crossroads”.
“There’s a battle for the soul of this country, now, as to what sort of country do we want to be?” he said.
“Because that toxic divide, that decline with Reform, it’s built on a sense of grievance.”
It is the first time Sir Keir has explicitly said the next election would be a straight fight between his party and Reform – and comes the day before the Labour conference begins.
Just hours before, after Sky News revealed Nigel Farage is on course to replace him, as a seat-by-seat YouGov poll found an election held tomorrow would result in a hung parliament, with Reform winning 311 seats – just 15 short of the 326 needed to win overall.
Once the Speaker, whose seat is unopposed, and Sinn Fein MPs, who do not sit in parliament, are accounted for, no other party would be able to secure more MPs, so Reform would lead the government.
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YouGov: Farage set to be next PM
Sir Keir said there is a “right-wing proposition” the UK has not had before, as it has been decades of either a Labour or Tory government, “pitched usually pretty much on the centrepiece of politics, the centre ground of politics”.
The PM said Reform and its leader, Mr Farage, provide a “very different proposition” of “patriotic national renewal” under Labour and a “toxic divide”.
He described his Labour government of being “capable of expressing who and what we are as a country accurately and in a way where people feel they’re valued and they belong, and that we can actually move forward together”.
Sir Keir referenced a march down Whitehall two weeks ago, organised by Tommy Robinson, as having “sent shivers through the spines of many communities well away from London”.
Elon Musk appeared via videolink at the rally and said “violence is coming to you”, prompting accusations of inciting violence.
Read more:
Starmer reveals digital ID plan
Davey warns Farage wants to turn Britain into ‘Trump’s America’
The PM said Reform presents a ‘toxic divide
The prime minister said the choice for voters at the next election, set to be in 2029, “is not going to be the traditional Labour versus Conservative”.
“It’s why I’ve said the Conservative Party is dead,” he added.
“Centre-right parties in many European countries have withered on the vine and the same is happening in this country.”
Reacting to Sir Keir’s comments, a Reform UK spokesman said: “For decades, the British people have been betrayed by both Labour and the Conservatives.
“People have voted election after election for lower taxes and controlled immigration, instead, both parties have done the opposite.
“The public are now waking up to the fact Starmer is just continuing the Tory legacy of high taxes and mass immigration.”
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