The SEC has taken a bunch of enforcement actions against different crypto companies lately. Several from the space have outrightly called out the current administration for being “100% anti-crypto.” They feel that regulators’ actions could “destroy” the industry. In fact, Ripple’s CEO, Brad Garlinghouse, recently branded the SEC’s actions to be unhealthy.
Earlier this month, the agency filed two lawsuits against top exchanges Binance and Coinbase for alleged securities law violations. A host of tokens—including SOL, ADA, MATIC, FIL, SAND, and AXS—were deemed to be securities. While the foundations behind the tokens have explicitly disagreed with the SEC, shockwaves did penetrate across the industry. Alongside price dips, even de-listings took place.
Stablecoins, DeFi to be next targets?
According to a recent Berenberg research report, DeFi protocols, and stablecoins—like Tether and USD Coin—could become the next victims of the SEC. A group of analysts headed by Mark Palmer noted that if the agency is looking to minimize the potential for unregulated DeFi protocols to serve as alternatives to regulated players, then it could “target the stablecoins that serve as the lifeblood of decentralized finance.”
In fact, several from the space have been speculating something similar over the past few days. For instance, Crypto Analyst Miles Deutscher recently tweeted:
Berenberg’s report further pointed out that by targeting stablecoins, the SEC could also weaken the DeFi ecosystem as a whole. According to the investment bank, if USDC is targeted by U.S. regulators, then Coinbase will have to bear the brunt. Here, it should be noted that in Q1 2023, the exchange registered $199 million in net revenue from interest income earned on USDC reserves. The said figure accounted for more than 1/4th of the total net revenue of Coinbase.
Nevertheless, Bitcoin will likely benefit from crackdown, according to Berenberg. The SEC considers the largest crypto to be a commodity, rather than an unregistered security. As a result, the U.S. crypto industry could end up becoming more Bitcoin-inclined in the coming years. In effect, MicroStrategy’s shares could be another beneficiary. As per the research report, they are well positioned to outperform, especially because the company focuses on buying and holding BTC.
At a realized price of around $30k, MicroStrategy currently owns 140k BTC. At the moment, its holdings are on the verge of breaking-even. This means, if BTC’s price continues rising, MicroStrategy’s position could soon turn profitable.