Berenberg Predicts SEC’s Focus to Shift to Stablecoins and DeFi in US Crypto Crackdown

Berenberg’s analysis shows the SEC is expanding its regulation of stablecoins and decentralized finance (DeFi). In addressing potential risks and ensuring compliance within the evolving landscape of digital assets, the SEC is paying increasing attention to these sectors.

SEC’s Focus on USD Coin: Berenberg Report Insights

The Berenberg report says regulators turning their attention to USD Coin could hurt Coinbase’s revenue. Moreover, stablecoins and decentralized finance (DeFi) are likely to be the next focus of the SEC regarding cryptocurrency regulation.

The Berenberg report notes that if USD Coin is regulated more heavily, it could decrease demand for it, thereby reducing Coinbase’s revenue potential.

Furthermore, the report highlights that the SEC will likely focus more on stablecoins and decentralized finance (DeFi) products, which could lead to more regulations on these assets and further reduce Coinbase’s potential revenue.

According to the investment bank, the SEC could ensure that stablecoins like tether (USDT) and USD Coin (USDC) comply with regulatory requirements. Furthermore, they might focus on regulating decentralized finance (DeFi).

A lawsuit filed by the SEC earlier this month accuses Binance, its founder Changpeng “CZ” Zhao, and Binance.US of violating federal securities laws. The next day, similar charges were filed against Coinbase, a rival cryptocurrency exchange.

To reduce the chance of unregulated DeFi protocols serving as viable alternatives to regulated lenders and exchanges, the SEC could adopt the following rules: “target the stablecoins that serve as the lifeblood of decentralized finance,” during the analysis, Mark Palmer led the effort.

The report suggests that the SEC could negatively impact DeFi if it regulates these stablecoins. A report says the SEC could undermine decentralized finance ecosystems by targeting stablecoins.

SEC’s Recognition of Bitcoin as Commodity Fuels Positive Regulatory Outlook 

Berenberg says U.S. regulators targeting USD Coin (USDC) could significantly impact Coinbase’s revenue. Through interest income earned on USDC reserves, Coinbase earned $199 million in net revenue in the first quarter of 2023, which accounted for about 27% of its total revenue. 

The SEC recognized Bitcoin (BTC) as a commodity instead of an unregistered security. Due to this, the note suggests Bitcoin will benefit from the regulatory crackdown, positioning it as the ultimate beneficiary.

Apparently, MicroStrategy’s (MSTR) shares are in an ideal position for outperformance. The company focuses on acquiring and holding bitcoins, especially since the regulatory crackdown is shaping a U.S. crypto industry more focused on Bitcoin than before. 

MSTR is well-positioned to profit from the institutional adoption of Bitcoin. In the first few months of 2021, its shares have already surged over 200%. The stock is expected to continue to perform well in the coming years.

For the past year, the company has been investing heavily in Bitcoin, and its stated goal is to hold the cryptocurrency as a treasury reserve. MicroStrategy’s stock has been one of the biggest beneficiaries of institutional crypto adoption.

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