Berenberg made several statements about altcoins in a research report he released on Tuesday. He said stablecoins and decentralized finance (DeFi) in particular could become the next target in the US Securities and Exchange Commission’s (SEC) crackdown on the crypto sector. Here are the details…
Warning for altcoins from Berenberg
The investment bank said the SEC can now focus on regulating stablecoins and decentralized finance protocols, including Tether (USDT) and USD Coin (USDC), two of the largest by market capitalization. The SEC said earlier this month that it was suing crypto exchange Binance, its founder Changpeng “CZ” Zhao, and the operating company of Binance.US for alleged violations of federal securities laws. A day later, he sued rival exchange Coinbase (COIN) on similar charges.
Analysts led by Mark Palmer wrote that if the SEC wants to reduce the potential for unregulated DeFi protocols to serve as viable alternatives to regulated lenders and exchanges, it could “target stablecoins that serve as the lifeblood of decentralized finance.” The report stated that the SEC could also weaken the DeFi ecosystem by targeting these stablecoins.
Berenberg points to US regulators
Berenberg says the impact on Coinbase’s revenues could be significant if USDC is targeted by US regulators. It states that in the first quarter of 2023, the exchange generated $199 million in net income from interest income from USDC reserves—about 27 percent of the total. The note stated that Bitcoin (BTC), which the SEC has approved as a commodity rather than a unregistered security, is likely to be the ultimate beneficiary of the crackdown.
The report noted that MicroStrategy (MSTR) shares are well positioned to outperform the company’s focus on acquiring and holding Bitcoin, as regulatory restraint will likely lead to a more Bitcoin-focused US crypto industry than it has in recent years.
Which altcoin projects could be targeted by the SEC?
So what’s between stablecoins and DeFi coins that Berenberg says “could be on the SEC’s target”? The largest stablecoins include Tether, USD Coin, Dai, Binance USD, TrueUSD, Pax Dollar, USDD, Gemini Dollar, TerraClassicUSD, Frax, USDJ, LUSD, TRIBE, EURS, USDX. The most popular DeFi tokens are AVAX, LINK, UNI, ICP, LDO, STX, GRT, RPL, AAVE, FTM, MKR, XTZ.
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