USDC and other stablecoins may encounter challenges if a new national defense bill, passed by the US Senate, is enacted into law.
The 2024 National Defense Authorization Act might introduce new KYC (Know Your Customer) and anti-money laundering requirements for stablecoin issuers, but it could be tough for them to meet these requirements.
New KYC Law Could Impact Stablecoins
Berenberg analyst Mark Palmer explained that the 2024 National Defense Authorization Act would require the U.S. Treasury Secretary to establish examination standards for crypto assets. This measure aims to ensure compliance with money laundering and sanctions laws.
Palmer highlighted that stablecoin holders’ identities are only known during the issuance and redemption of stablecoins, creating a challenge for stablecoin issuers in complying with the proposed KYC law.
According to Palmer’s analysis, the introduction of this new KYC law could directly affect the value and market cap of stablecoins like USDC.
Impact of the Act on Coinbase
Berenberg analyst Mark Palmer warned that the 2024 National Defense Authorization Act could have a negative impact on Coinbase.
According to Palmer, during the first quarter of this year, 27% of Coinbase’s net revenue came from interest income on USDC.
Despite the potential impact of the Act, Coinbase’s stock has been performing well throughout the year. Its stock price increased from $33 on January 1 to $98.61 on August 1.
Coinbase’s strong performance is attributed to two main factors: a favorable ruling for Ripple Labs and the filings for spot Bitcoin ETFs by major companies like BlackRock, among others.
KYC’s Significance
KYC, or “Know Your Customer,” is a crucial process used by companies to prevent various crimes, such as money laundering.
The main global regulator overseeing the KYC process is the Financial Action Task Force (FATF).
FATF is referred to as “the global money laundering and terrorist financing watchdog” and establishes international regulations to combat illegal activities.
Important:Ā Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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