Stablecoins and decentralized finance (DeFi) are likely to become the next targets in the U.S. Securities and Exchange Commission (SEC)'s crackdown on the crypto industry, Berenberg said in a research report on Tuesday.
If the SEC is looking to reduce the potential for unregulated DeFi protocols to serve as viable alternatives to regulated lenders and exchanges, then they could “target the stablecoins that serve as the lifeblood of decentralized finance,” analysts led by Mark Palmer wrote.
By targeting these stablecoins, the SEC may also weaken the DeFi ecosystem, the report said.
Berenberg says that if USDC is targeted by U.S. regulators, the impact on Coinbase’s revenue could be significant, noting that in first-quarter 2023 the exchange generated $199 million in net revenue – about 27% of the total – from interest income earned on USDC reserves.
Bitcoin (BTC), which the SEC has affirmed as a commodity rather than an unregistered security, is likely to be the ultimate beneficiary of the crackdown, the note said.
MicroStrategy (MSTR) shares are well positioned to outperform, given the company’s focus on acquiring and holding bitcoins, as the regulatory clampdown will likely give rise to a U.S. crypto industry that is more bitcoin-focused than it has been in recent years, the report added.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.