Binance and Coinbase Under SEC Fire; Stablecoins in Crosshairs

The research report from Berenberg, published on Tuesday, suggests that stablecoins and decentralized finance (DeFi) could be targeted in the SEC’s crackdown on the cryptocurrency industry.

According to the investment bank, the SEC may now prioritize ensuring regulatory compliance of stablecoins, including the two largest ones, tether (USDT) and USD Coin (USDC), as well as decentralized finance protocols.

Recent lawsuits filed by the SEC against Binance, its founder Changpeng “CZ” Zhao, Binance.US, and Coinbase (COIN) further support this regulatory action.

In the report, Mark Palmer and the team of analysts emphasize that the SEC’s potential focus on stablecoins aims to limit the viability of unregulated DeFi protocols as alternatives to regulated lenders and exchanges.

The report suggests that such a move could potentially undermine the DeFi ecosystem.

Berenberg points out the significant impact on Coinbase’s revenue if U.S. regulators specifically target USDC.

It highlights that in the first quarter of 2023, Coinbase generated $199 million in net revenue, accounting for approximately 27% of the total, from interest income earned on USDC reserves.

As per the SEC’s classification, the report anticipates that Bitcoin (BTC), considered a commodity rather than an unregistered security, will be the primary beneficiary of the regulatory crackdown.

Additionally, the report mentions that MicroStrategy (MSTR) shares are well-positioned for outperformance due to the company’s strategic emphasis on acquiring and holding bitcoins.

With the regulatory clampdown shaping a U.S. crypto industry that increasingly revolves around Bitcoin compared to previous years, MicroStrategy stands to benefit from this shift.

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Jaycee De Guzman

Founder and CEO at Equilyst Analytics

Experience the expertise of Jaycee De Guzman, the brain of Equilyst Analytics, renowned for his unique data analysis. He is a computer scientist and a self-taught digital marketing strategist and agriculturist. Since Equilyst Analytics’ founding in 2012, over 10,000 local and foreign clients have consulted with Jaycee de Guzman on crypto and stock investments.

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