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…
