Stablecoins and the DeFi sector are likely to become the SEC‘s next targets in its crackdown on the crypto industry, according to a report by investment bank Berenberg, a copy of which CoinDesk has reviewed.
The analysts believe the SEC will focus on the regulatory compliance of the two largest stablecoins by market capitalization—Tether (USDT) and USD Coin (USDC).
According to the report, if the agency targets stablecoins, this would significantly undermine the DeFi ecosystem.
In particular, mandatory regulation of USDC would negatively affect Coinbase’s financial position. Analysts noted that in the first quarter of 2023 the exchange earned $199 million — around 27% of the company’s total profit — from interest income on issuing the ‘stablecoin’.
Also, Berenberg pointed out that the SEC defined Bitcoin as a commodity, not a security. According to the firm, at such a pace the first cryptocurrency would become the ‘ultimate beneficiary of punitive measures’.
Ultimately, regulatory constraints will push the U.S. crypto industry toward a greater Bitcoin orientation, the analysts concluded.
In June the SEC sued Binance and Coinbase. In the latter, refused to change their business model because of the Commission’s lawsuit.
Coinbase’s chief legal officer Paul Grewal stated that the agency’s powers do not include the authority to ban [decentralized platforms] in the absence of explicit Congressional authorization.
Earlier, former SEC lawyer John Reed Stark predicted a prolonged battle between crypto exchanges and the regulator. He urged clients of trading platforms to ‘stop using them immediately’.
Earlier, MicroStrategy founder and former CEO Michael Saylor predicted a multi-fold rise in Bitcoin thanks to the regulator’s actions.