Bellevue Bank: Stablecoins and DeFi may become the next target of the SEC

Bellevue Bank warns that SEC may target stablecoins and DeFi in the future.

Author: Will Canny, CoinDesk; Translation: Song Xue, Blocking

Berenberg Bank said in a research report on Tuesday that stablecoins and decentralized finance (DeFi) are likely to be the next targets of the US Securities and Exchange Commission (SEC) in its crackdown on the cryptocurrency industry.

The investment bank said that the SEC may now focus on bringing stablecoins (including the two largest stablecoins by market capitalization) and decentralized finance protocols into the regulatory compliance scope.

Earlier this month, the SEC said it was suing cryptocurrency exchange Binance, its founder Changpeng Zhao, and Binance.US’ operating company, accusing them of violating federal securities laws. A day later, it filed a similar charge against exchange Coinbase (COIN).

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Analyst Mark Palmer wrote that if the SEC wants to reduce the likelihood of unregulated DeFi protocols as feasible alternatives to regulated banks and exchanges, they can “target stablecoins as the lifeblood of distributed finance.”

The report said that SEC could also weaken the DeFi ecosystem by targeting these stablecoins.

Berenberg Bank said that if USDC becomes a target of US regulators, the impact on Coinbase’s revenue could be significant, noting that the exchange earned a net revenue of $199 million from USDC reserves in the first quarter of 2023, accounting for about 27% of total revenue.

The report said that Bitcoin has been recognized by the SEC as a commodity rather than an unregistered security, and is likely to be the ultimate beneficiary of the crackdown.

Given the company’s focus on acquiring and holding Bitcoin, MicroStrategy (MSTR) stocks may outperform the broader market as regulatory restrictions may cause the US cryptocurrency industry to focus more on Bitcoin than in recent years.

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