New coin, who dis?… Coinbase said it plans to list a new stablecoin next week amid a flurry of regulatory attention directed at the crypto asset class. Dubbed Euro Coin (EUROC), the Circle-issued crypto is pegged to the euro — aka: it’s designed to = 1 euro. Circle says EUROC is fully backed by euros held in reserve, similar to its US-dollar-pegged stablecoin, USDC, the second-largest stablecoin by market cap.
Stables get the shake-up… The SEC is investigating whether stablecoins violate investor-protection laws. It’s looking into Coinbase’s and Circle’s stablecoin businesses, though Coinbase says USDC is “not a security.” Meanwhile, the SEC reportedly plans to sue crypto-services company Paxos, arguing that its Binance-branded BUSD stablecoin is an unregistered security. The scrutiny is problematic for crypto exchanges as stablecoins are increasingly important to their bottom lines:
- Interest-ed: In its earnings report this week, Coinbase said it had earned $146M in interest income from USDC — nearly one-fourth of its total quarterly revenue.
- Fi-nanced: Last month (before its market cap nosedived) BUSD stablecoin transactions made up 40% of Binance's trading volume.
The road to diversification can be bumpy… As crypto winter scared off investors, exchanges reliant on transaction fees saw their revenue plummet. Coinbase's trading volume sank 50% last year, making $$ earned from stablecoins (and staking) more important than ever. Now regulatory scrutiny could threaten that #diversification. While Coinbase said its "regulatory focus" will position it for success, this week it also said it might decide not to pull a crypto off its exchange — even if the SEC says it's a security.