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, according to a research report from Berenberg on Tuesday. The investment bank believes that the SEC may now focus on bringing stablecoins, including the two largest by market cap, Tether (USDT) and USD Coin (USDC), and decentralized finance protocols into regulatory compliance.
The SEC’s recent lawsuits against crypto exchanges Binance and Coinbase on allegations of violating federal securities laws could be a sign of things to come. If the SEC is looking to reduce the potential for unregulated DeFi protocols, they could target the stablecoins that serve as the lifeblood of decentralized finance, according to the report. This could weaken the DeFi ecosystem and have a significant impact on Coinbase’s revenue, as USDC reserves generated $199 million in net revenue for the exchange in first-quarter 2023.
The ultimate beneficiary of the crackdown could be Bitcoin (BTC), which the SEC has affirmed as a commodity rather than an unregistered security. MicroStrategy (MSTR) shares are also well positioned to outperform, 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 SEC’s crackdown on stablecoins and DeFi could be a boon for Bitcoin, according to Berenberg’s research report. The investment bank believes that the SEC may target stablecoins and DeFi protocols in order to reduce the potential for unregulated finance. This could weaken the DeFi ecosystem and have a significant impact on Coinbase’s revenue, while Bitcoin (BTC) could benefit from the SEC’s affirmation of it as a commodity. MicroStrategy (MSTR) shares could also outperform, as the regulatory clampdown will likely give rise to a U.S. crypto industry that is more bitcoin-focused.