Stablecoins, such as USDC, could face a complex situation if a new national defense bill approved by the US Senate becomes law.
The 2024 National Defense Authorization Act could introduce new KYC and anti-money laundering requirements that stablecoin issuers won’t be able to comply with.
Berenberg analyst Mark Palmer explained that the amendment would require the U.S. Treasury Secretary to “establish examination standards for crypto assets” to help regulators ensure compliance with money laundering and sanctions laws.
Palmer added that the identities of the stablecoin holders can be known only when the stablecoins are issued and redeemed. He said the new KYC law could directly impact the value and market cap of stablecoins like USDC.
The act’s impact on Coinbase
Palmer explained that the 2024 National Defense Authorization Act could impact Coinbase negatively.
He said the exchange “derived 27% of its net revenue from interest income on USDC” in the first quarter of this year.
He added that the exchange “derived 27% of its net revenue from interest income on USDC” during the first quarter of this year.
Coinbase’s stock has been performing well this year. Its stock jumped from $33 on January 1 to $98.61 on August 1.
The company has been outperforming due to two main reasons. The favorable ruling handed down to Ripple Labs and the filings for spot Bitcoin ETFs from major companies like BlackRock, among others.
Why is KYC important
The process known as KYC and also as “Know Your Customer” helps companies prevent different crimes, such as money laundering, from taking place.
The main regulator worldwide behind the KYC process is known as the Financial Action Task Force (FATF).
According to its official website, the regulator can be defined as “the global money laundering and terrorist financing watchdog.”
The regulator sets international regulations with the aim of preventing illegal activities from taking place.