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New US Defense Bill Could Pose Compliance Challenges for Stablecoin Issuers and Impact Coinbase Revenue

Stablecoins, including Circle's USD Coin (USDC), may face difficulties complying with new KYC and anti-money laundering measures if a recent amendment to the 2024 National Defense Authorization Act (NDAA) is passed. The amendment would require the US Treasury Secretary to establish examination standards for crypto assets to ensure compliance with money laundering and sanctions laws.

Berenberg analyst Mark Palmer warns that this could cause further deterioration in USDC's market cap, as the identities of stablecoin holders can only be determined when the asset is issued and redeemed.

This could also prove problematic for Coinbase, which derived 27% of its net revenue from interest income on USDC in Q1 2021. Berenberg maintains its "hold" rating for Coinbase stock, noting significant uncertainty in the future but cushion and flexibility from the company's large balance of cash and equivalents.

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