Coinbase's Regulatory Tailwinds and the Untapped Stablecoin Opportunity: Why the Rally Has Legs

The month of June 2025 has been transformative for Coinbase (COIN), with its stock soaring 43% on news that the U.S. Senate passed the GENIUS Act, a landmark bill regulating stablecoins. While skeptics point to declining trading volumes and heightened competition, a deeper analysis reveals that regulatory clarity and indirect stablecoin revenue streams position Coinbase as an undervalued buy. This article dissects how the GENIUS Act's progress, its partnership with Circle (USDC), and underappreciated yield opportunities could fuel sustained growth.

Regulatory Clarity: The Catalyst for Coinbase's Surge

The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), passed by the Senate on June 17 with a 68-30 bipartisan vote, represents a turning point for the crypto industry. By establishing federal oversight for stablecoins—digital currencies pegged to fiat—this legislation removes a major overhang for Coinbase. The bill:
1. Legalizes non-bank stablecoin issuance: Allows companies like Circle (operator of USD Coin, or USDC) to continue issuing stablecoins under federal licenses.
2. Sets reserve requirements: Mandates 100% backing of stablecoins with high-quality assets, aligning with global standards like the EU's MiCA framework.
3. Preempts state-level overregulation: Reduces the risk of a patchwork of conflicting state laws.

For Coinbase, which earns 50-100% of USDC reserve income through its partnership with Circle, the Act's passage eliminates existential uncertainty. The stock's 16% surge on June 18 (the day of the Senate vote) underscores market recognition of this tailwind.

The Underappreciated Stablecoin Revenue Engine

Coinbase's direct trading revenue has faced headwinds as crypto volatility deters speculative retail investors. However, its indirect stablecoin revenue streams—often overlooked by analysts—are quietly growing.

1. USDC: A Cash-Cow with Global Reach

As the second-largest stablecoin by market cap (now $60 billion), USDC generates consistent income for Coinbase through:
- Reserve interest: Earnings from the $60 billion in reserves backing USDC (e.g., Treasury bills and commercial paper).
- Transaction fees: A small percentage on USDC transfers and smart contract interactions.

In Q1 2025, this revenue totaled $298 million, or 15% of Coinbase's net revenue—up 51% year-over-year. Analysts project USDC's market cap to hit $100 billion by 2026, fueling further growth.

2. Stablecoin Yield Products: The Next Frontier

Coinbase's Coinbase One Card (partnered with American Express) and USDC-integrated Shopify payments are not just about user acquisition—they create recurring revenue channels. For instance, the Card rewards users with Bitcoin for spending, but its true value lies in driving USDC adoption for merchant settlements.

Meanwhile, the GENIUS Act's reserve transparency rules could push institutional investors toward “AAA-rated” stablecoins like USDC, further boosting its market share.

Why the Stock Is Undervalued Despite Trading Volume Concerns

While Coinbase's Q2 2025 trading volumes dipped 14% from Q1, the market is mispricing its regulatory and structural advantages:

1. Global Licensing Wins

Coinbase recently secured the first U.S.-based Markets in Crypto-Assets (MiCA) license from Luxembourg, enabling operations across all 27 EU member states. This access to a 450M+ population market—where stablecoin adoption is surging—adds a $20 billion addressable market for USDC.

2. Derivatives Market Expansion

The $2.9B acquisition of Deribit, a leading crypto derivatives exchange, positions Coinbase to capitalize on the $1.5 trillion crypto derivatives market. The integration of Deribit's institutional-grade infrastructure into Coinbase's ecosystem reduces reliance on volatile spot trading.

3. Undervalued Relative to Peers

Coinbase's 60x forward P/E multiple appears high, but it compares favorably to fintech peers like PayPal (26x) when considering its stablecoin-driven recurring revenue. Analysts project adjusted net income to rise to $2.5 billion by 2026, implying a 16% annualized return even without trading volume recovery.

Risks and the Path Forward

The biggest near-term risk is House delays. While the Senate has acted decisively, House Republicans want to tie the GENIUS Act to the broader CLARITY Act (regulating crypto markets), which could prolong negotiations. However, with President Trump urging swift passage and bipartisan Senate support, a compromise is likely by early August , avoiding a legislative cliff.

Investment Thesis: Buy the Dip, Own the Regulatory Cycle

Coinbase's stock is primed for further upside as the GENIUS Act becomes law and stablecoin adoption accelerates. Key catalysts include:
- House passage by late August: Reducing regulatory uncertainty and unlocking institutional capital.
- USDC's MiCA-compliant EU rollout: Expanding revenue geographically.
- Deribit's integration: Diversifying revenue beyond spot trading.

With a $78 billion market cap and a $400 price target from bulls (16% above June highs), the risk-reward remains skewed to the upside. For investors, the dip following the Senate vote's initial rally is a buying opportunity.

Recommendation: Establish a position in COIN at current levels, with a price target of $400 by end-2025. Monitor House progress closely—any delay beyond September could trigger short-term volatility, but the long-term trajectory is clear.

The regulatory tailwinds are here. The stablecoin opportunity is real. Coinbase is positioned to capitalize on both.