Source: Can Tether's Dominance Survive the U.S. Stablecoin Bill?
Compiled & Translated by: Lenaxin, ChainCatcher
Background
- Stablecoin issuer Tether may soon face significant challenges in the U.S. market, with its USDT potentially not meeting the standards outlined in the Senate's GENIUS Act.
- Legal experts suggest Tether may need to wait and see, but critics of the bill believe Tether will still find significant loopholes to attract U.S. investors.
Tether's USDT is the stablecoin with the largest global market share. Recent data shows its dollar-pegged issuance has reached $155 billion. However, analysts point out that Tether's current model may struggle to meet upcoming U.S. regulatory requirements. The U.S. Senate will conduct a final review of the 2025 National Innovation Guidance and Establishment Act for Stablecoins (GENIUS Act) on Tuesday, which will be the first federal bill to enter the legislative process in the cryptocurrency field. The bill will then be submitted to the House of Representatives and must be agreed upon by both chambers before being signed into law by the President.
Industry experts believe Tether may face two choices: adjust its business model to meet new U.S. regulations or exit the U.S. market and focus on overseas business. The clarity of the U.S. regulatory framework could drive industry expansion while influencing regulatory approaches in other jurisdictions.
The current legislative draft provides a pathway for foreign stablecoin issuers to enter the U.S. market, but the compliance procedure is complex. According to the draft requirements, if companies like Tether wish to issue tokens to U.S. users, they must meet the following conditions: first, they must be supervised by a foreign regulatory body recognized by the U.S. with standards comparable to U.S. regulations; second, they may need to register with the Office of the Comptroller of the Currency (OCC) and be subject to regulation; finally, they must maintain sufficient reserve funds with financial institutions in the U.S. to ensure redemption for U.S. customers in case of issuer bankruptcy.
The bill imposes strict reserve management requirements on all regulated issuers: they must hold high-liquidity assets such as cash or U.S. Treasury bonds equal to the circulating tokens. In terms of compliance mechanisms, issuers must undergo monthly audits by registered accounting firms, with audit reports certified by the CEO and CFO, meaning executives will personally bear legal responsibility for the accuracy of information disclosure. Notably, this regulatory framework sets more frequent disclosure obligations for stablecoin issuers compared to traditional financial institutions.
Additionally, according to the bill's requirements, related enterprises must fully comply with anti-money laundering regulations applicable to U.S. financial institutions.
Does Tether Need to Rush?
"If I were Tether, I wouldn't hastily enter the U.S. market saying 'I definitely want to participate, I want to participate,' unless I understand the relevant regulations," Steve Gannon, a digital asset client lawyer at Davis Wright Tremaine, told CoinDesk. "In terms of compliance with these regulations, the downstream impact on Tether could be massive investments of time, effort, manpower, funds, and technology."
As one of the most profitable companies globally, Tether will likely continue to focus its strategic center on emerging markets with limited impact from the GENIUS Act. It's worth noting that Tether has recently moved its headquarters to El Salvador, a country with lenient cryptocurrency policies and a less developed financial regulatory system.
However, it should be pointed out that the U.S. bill grants the Treasury Secretary broad discretionary powers, including assessing the completeness of regulatory systems in various countries and deciding whether to grant regulatory exemptions to specific enterprises.
"For example, the Trump administration could reach a reciprocal agreement with El Salvador's Bukele government, allowing Tether to fully enter the U.S. market while avoiding the bill's requirements," according to talking points from the camp of Senator Elizabeth Warren, a senior Democratic senator on the Senate Banking Committee and a major opponent of the bill.
Corey Freler, investor protection director at the Consumer Federation of America and former SEC cryptocurrency policy advisor, noted: "Even though El Salvador's current regulatory system is not yet sophisticated, it's hard to imagine it could reach the same level of soundness and safety as the U.S. However, under the current regulatory framework, the country may still receive reciprocal treatment with U.S. standards."
Despite Senator Warren and her allies taking a strong opposing stance, they failed to prevent many Democratic colleagues from supporting the bill. Supporters believe it at least establishes a preliminary regulatory framework for this critical area.
Critics point out that the bill still has obvious loopholes that may allow unregulated foreign stablecoins to circulate through U.S. decentralized crypto platforms.
Warren stated in a Senate speech last week: "Unfortunately, the GENIUS Act significantly expands the stablecoin market without addressing its fundamental national security risks. The bill also has obvious loopholes that allow Tether (a notorious foreign stablecoin issuer now headquartered in El Salvador) to enter the U.S. market."
Tether's U.S. Plans
However, Tether CEO Paolo Ardoino recently stated that the company might not introduce its mainstream token to the U.S. market as a direct issuer, but is considering launching a new stablecoin through a fully U.S.-regulated local branch.
For Tether, current U.S. regulatory requirements are adding insult to injury, as its existing business model is far from compliant. While the company has not commented on the GENIUS Act, its updated service terms this year have warned users: "If Tether fails to adapt to the continuously changing regulatory environment, it may face regulatory sanctions that could adversely affect the company's operations."
Although the Senate's legislative process marks a significant policy breakthrough for the digital asset industry, uncertainty remains: the House of Representatives will propose its own version, and more critically, accompanying legislation—a regulatory framework for other cryptocurrency areas—is still being developed. Before the bill is signed by Trump and federal agencies issue implementation details, stablecoin issuers cannot obtain clear compliance guidelines.
Richard Rosenthal, head of digital asset regulatory business at Deloitte, wrote in an email to CoinDesk: "Foreign issuers face two unclear obstacles: first, what conditions the law will ultimately allow for serving U.S. customers; second, how regulatory agencies will exercise discretion in controlling market access. The final direction of this politically sensitive field remains to be seen."
However, Furrer told CoinDesk that House representatives are unlikely to lower compliance thresholds for Tether—especially given the presence of Howard Lutnick, a former Cantor Fitzgerald executive who managed Tether's U.S. Treasury reserves during the Trump administration and is now Secretary of Commerce.
Friel stated: "I don't think the House will force any further confrontation with Tether." But he added that if large non-bank competitors like Google and Amazon start launching stablecoins, "the House might be motivated to take more action on this issue."
Competitive Circle?
The American company Circle and its USDC have been waiting to seize market share from its main competitor Tether, and Circle also plans to participate in the anticipated wave of US cryptocurrency regulation. If institutional investors and traditional financial companies embrace digital assets as the industry hopes, and Tether continues to remain outside the US financial system, it may miss opportunities.
Earlier this year, the US Securities and Exchange Commission (SEC) added some stablecoins to its growing list of cryptocurrency projects that it does not consider within its scope. However, the agency's statement included some warnings about Tether.
Although the regulatory agency—which has been led by crypto-friendly leaders since Trump's election—also excluded stablecoins from its securities jurisdiction, it noted in a footnote that appropriate stablecoin reserves "do not include precious metals or other crypto assets", both of which are part of Tether's reserves. The GENIUS Act clearly states that "payment stablecoins are not securities or commodities, and approved payment stablecoin issuers are not investment companies", but this is not yet law.
Technically, these considerations are not part of Tether's current business model, as Tether deliberately avoids direct contact with US customers. At least for now.
Disclaimer
The content of this article does not represent the views of ChainCatcher. The opinions, data, and conclusions in the text represent the personal positions of the original author or interviewees. The translation team maintains a neutral attitude and does not endorse its accuracy. It does not constitute professional advice or guidance in any field. Readers should use their independent judgment cautiously. This translation is limited to knowledge sharing purposes, and readers are requested to strictly comply with local laws and regulations and not participate in any illegal financial activities.
