Regulatory action against the Binance USD (BUSD) stablecoin and its issuer Paxos was specific to BUSD and cannot be extrapolated to others such as USD Coin (USDC), Bernstein said in a research report Thursday.
Some in the industry had expressed concern that crypto was “actively being de-ramped from the banking system, with an attack on stablecoins and custody rules,” the report said.
Bernstein notes that Circle, the issuer of USDC, said it had not received any notice from the Securities and Exchange Commission. A stablecoin is a type of cryptocurrency whose value is pegged to another asset, such as the U.S. dollar or gold.
The custody rule change is currently a proposal, and is favorable for bank-custodians and thus positive for crypto custodians such as Anchorage, who have bank charters, and also custodians who operate under state charters, analysts Gautam Chhugani and Manas Agrawal wrote.
“While the U.S. regulations seem to be getting harder, the regulatory murmurs from Hong Kong seem to be net positive, with expected easing of norms,” the report said, adding that “we would not be surprised if the crypto market is led by Asia to begin with, until the regulatory fears settle down in the U.S.”
The broker notes that there have been large gains in cryptocurrencies this week with total market cap inching toward $1.2 trillion. Sharp price moves are affected by short covering, but the move higher is also “forcing existing crypto investors to dial up exposure with every move,” the note said.
In recent months, bearish crypto investors have been ignoring very healthy user trends on-chain. The collapse of crypto exchange FTX triggered a spike in on-chain self custody wallets willing to use on-chain exchanges, according to the note.
“Layer 2 ecosystems have been vibrant, with cheap transaction cost driving adoption and new app deployments,” Bernstein said.
