Author: Jesse Hamilton, Source: Coindesk, Translated by: Shaw Golden Finance
The USDT issued by Tether is the largest stablecoin in the global market. According to the data, its USDT issuance has reached $155 billion. But as things stand, Tether will almost certainly not be able to meet the compliance requirements of U.S. lawmakers. The U.S. Senate passed the landmark GENIUS Act on Tuesday, boosting the U.S. federal government's regulatory efforts for stablecoins. The bill will then be submitted to the House of Representatives for consideration, where it will need to be signed into law by the President after the Senate and House of Representatives reach an agreement.
According to experts' predictions, Tether may ultimately face a choice: either overcome significant challenges to comply with future laws, or settle for trying to maintain its market share outside the United States. The clarity of the U.S. government's regulatory framework may drive industry scale expansion, but it could also affect the regulatory direction of other jurisdictions.
The current draft bill opens the way for foreign stablecoin issuers to enter the U.S. market, but the process can be complex. Overall, if a company like Tether wants to issue tokens to U.S. users, it must first be regulated by an accredited foreign body that is on par with U.S. standards. In addition, issuers may be required to register with and be regulated by the Office of the Comptroller of the Currency (OCC) and "maintain sufficient reserves in U.S. financial institutions to meet the liquidity needs of U.S. customers in the event of the issuer's insolvency."
All issuers subject to potential legal regulation must comply with strict reserve standards, holding cash, U.S. Treasury bonds, and other relevant high-liquid assets that are pegged to their issuance volume on a one-to-one basis. These institutions are also required to undergo audits by certified public accounting firms on a monthly basis, with the audit results certified by the company's chief executive officer and chief financial officer, meaning that executives will assume personal legal responsibility for the authenticity of the information disclosed. It is noteworthy that this regulatory framework imposes more frequent disclosure obligations on stablecoin issuers compared to traditional financial institutions.
In addition, relevant institutions must fully comply with anti-money laundering regulations applicable to U.S. financial institutions.
Does Tether need to rush for change?
"If I were Tether, I wouldn't rush into the U.S. unless I understood the relevant regulations," said Steve Gannon, an attorney at Davis Wright Tremaine, in an interview. "In terms of complying with these regulations, the impact on Tether could be a massive investment of time, energy, manpower, funds, and technology."
Ultimately, as one of the most profitable companies in the world, Tether may continue to focus on emerging markets, where the impact of the "GENIUS Act" is relatively small. Tether recently relocated its headquarters to El Salvador, which has a relatively lax cryptocurrency regulatory environment, and it is clear that El Salvador is not particularly well-developed in terms of financial regulation.
Nonetheless, the U.S. legislation grants the Secretary of the Treasury significant discretion to assess which countries have sufficiently robust regulatory frameworks and whether certain companies can be granted regulatory exemptions.
"For example, the Trump administration could reach a reciprocity agreement with El Salvador, where Tether is headquartered, allowing Tether to enter the U.S. market while circumventing the requirements of the bill," said one of the main opponents of the bill, senior Democratic Senator Elizabeth Warren (.
Corey Frayer, the director of investor protection at the Consumer Federation of America and former cryptocurrency policy advisor at the U.S. Securities and Exchange Commission, stated: "It is hard to imagine that El Salvador can establish a regulatory system as sophisticated and secure as that of the United States. However, under the current regulatory framework, they still qualify for reciprocal treatment and enjoy standards equivalent to those in the U.S."
Despite the tough rhetoric from Warren and her allies, they cannot stop many Democratic lawmakers from supporting the bill. Proponents believe that the bill will at least begin to oversee and regulate this key part of the cryptocurrency industry, namely stablecoins. Critics of the bill argue that it still has significant loopholes that could allow unregulated foreign stablecoins to circulate through decentralized crypto platforms in the U.S.
Warren stated during a speech in the Senate last week: "Unfortunately, the GENIUS Act significantly expands the market for stablecoins but fails to address the fundamental national security risks it poses. The bill also has obvious loopholes that allow Tether to enter the U.S. market."
Tether US Plans
However, Tether CEO Paolo Ardoino has recently indicated that the company may not introduce its tokens to the U.S. market as a direct issuer, but is considering issuing a fully regulated U.S. branch settlement stablecoin.
For Tether, the regulatory requirements in the United States are a further blow, and it has not yet met these standards. Tether updated its terms of service this year.
The warning to its users: "If Tether fails to comply with the changing regulatory regime, Tether and its affiliates may face regulatory sanctions, which could adversely affect Tether and its operational capabilities."
Although the Senate's passage of the GENIUS Act marks an unprecedented policy victory for the digital asset industry, there remains significant uncertainty, as the House may have its own version, and more importantly, the accompanying legislation—a regulatory framework for other areas of cryptocurrency—is still being developed. Before the bill is approved by Trump and federal agencies issue implementation guidelines, stablecoin issuers find it difficult to obtain clear compliance guidance.
Richard Rosenthal, head of digital asset regulation at Deloitte, stated: "The future path for foreign issuers will face two unknown obstacles: 1. Under what conditions will the final laws allow foreign issuers to serve U.S. customers; 2. How to exercise the relevant regulatory discretion to allow or restrict their entry into the U.S. market. The outcome in this politically controversial area remains to be seen."
However, Freer said that House lawmakers are unlikely to lower compliance thresholds for Tether—especially in the face of the company's ally in the Trump administration, Commerce Secretary Howard Lutnick, who previously worked at brokerage Cantor Fitzgerald, overseeing Tether's U.S. reserves.
Freire stated, "I don't think the House will force any further actions against Tether." However, he added that if large non-bank competitors like Google and Amazon start launching stablecoins, "the House may be motivated to take more action on this issue."
Competitive Cycle?
The US stablecoin issuer Circle and its USDC have been looking for opportunities to capture market share from its competitor Tether. Circle also intends to participate in the anticipated wave of cryptocurrency regulation in the US. 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 out on a great opportunity.
Earlier this year, the U.S. Securities and Exchange Commission )SEC( added some stablecoins to its growing list of cryptocurrency projects, which the agency believes are not within its scope of concern. However, the SEC's statement issued some warnings regarding Tether.
Although the SEC has been led by cryptocurrency-friendly leaders since Trump's election and has excluded stablecoins from its securities jurisdiction, the SEC has also pointed out that appropriate stablecoin reserves "do not include precious metals or other cryptocurrencies," both of which are part of Tether's reserves. The "GENIUS Act" clearly states that "payment stablecoins are not securities or commodities, and authorized payment stablecoin issuers are not investment companies, but this is not yet a legal provision."
From a technical perspective, these considerations are not part of Tether's current business model, as Tether deliberately avoids direct contact with U.S. customers, at least for now.
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Can Tether's dominance withstand the test of the US stablecoin bill?
Author: Jesse Hamilton, Source: Coindesk, Translated by: Shaw Golden Finance
The USDT issued by Tether is the largest stablecoin in the global market. According to the data, its USDT issuance has reached $155 billion. But as things stand, Tether will almost certainly not be able to meet the compliance requirements of U.S. lawmakers. The U.S. Senate passed the landmark GENIUS Act on Tuesday, boosting the U.S. federal government's regulatory efforts for stablecoins. The bill will then be submitted to the House of Representatives for consideration, where it will need to be signed into law by the President after the Senate and House of Representatives reach an agreement.
According to experts' predictions, Tether may ultimately face a choice: either overcome significant challenges to comply with future laws, or settle for trying to maintain its market share outside the United States. The clarity of the U.S. government's regulatory framework may drive industry scale expansion, but it could also affect the regulatory direction of other jurisdictions.
The current draft bill opens the way for foreign stablecoin issuers to enter the U.S. market, but the process can be complex. Overall, if a company like Tether wants to issue tokens to U.S. users, it must first be regulated by an accredited foreign body that is on par with U.S. standards. In addition, issuers may be required to register with and be regulated by the Office of the Comptroller of the Currency (OCC) and "maintain sufficient reserves in U.S. financial institutions to meet the liquidity needs of U.S. customers in the event of the issuer's insolvency."
All issuers subject to potential legal regulation must comply with strict reserve standards, holding cash, U.S. Treasury bonds, and other relevant high-liquid assets that are pegged to their issuance volume on a one-to-one basis. These institutions are also required to undergo audits by certified public accounting firms on a monthly basis, with the audit results certified by the company's chief executive officer and chief financial officer, meaning that executives will assume personal legal responsibility for the authenticity of the information disclosed. It is noteworthy that this regulatory framework imposes more frequent disclosure obligations on stablecoin issuers compared to traditional financial institutions.
In addition, relevant institutions must fully comply with anti-money laundering regulations applicable to U.S. financial institutions.
Does Tether need to rush for change?
"If I were Tether, I wouldn't rush into the U.S. unless I understood the relevant regulations," said Steve Gannon, an attorney at Davis Wright Tremaine, in an interview. "In terms of complying with these regulations, the impact on Tether could be a massive investment of time, energy, manpower, funds, and technology."
Ultimately, as one of the most profitable companies in the world, Tether may continue to focus on emerging markets, where the impact of the "GENIUS Act" is relatively small. Tether recently relocated its headquarters to El Salvador, which has a relatively lax cryptocurrency regulatory environment, and it is clear that El Salvador is not particularly well-developed in terms of financial regulation.
Nonetheless, the U.S. legislation grants the Secretary of the Treasury significant discretion to assess which countries have sufficiently robust regulatory frameworks and whether certain companies can be granted regulatory exemptions.
"For example, the Trump administration could reach a reciprocity agreement with El Salvador, where Tether is headquartered, allowing Tether to enter the U.S. market while circumventing the requirements of the bill," said one of the main opponents of the bill, senior Democratic Senator Elizabeth Warren (.
Corey Frayer, the director of investor protection at the Consumer Federation of America and former cryptocurrency policy advisor at the U.S. Securities and Exchange Commission, stated: "It is hard to imagine that El Salvador can establish a regulatory system as sophisticated and secure as that of the United States. However, under the current regulatory framework, they still qualify for reciprocal treatment and enjoy standards equivalent to those in the U.S."
Despite the tough rhetoric from Warren and her allies, they cannot stop many Democratic lawmakers from supporting the bill. Proponents believe that the bill will at least begin to oversee and regulate this key part of the cryptocurrency industry, namely stablecoins. Critics of the bill argue that it still has significant loopholes that could allow unregulated foreign stablecoins to circulate through decentralized crypto platforms in the U.S.
Warren stated during a speech in the Senate last week: "Unfortunately, the GENIUS Act significantly expands the market for stablecoins but fails to address the fundamental national security risks it poses. The bill also has obvious loopholes that allow Tether to enter the U.S. market."
Tether US Plans
However, Tether CEO Paolo Ardoino has recently indicated that the company may not introduce its tokens to the U.S. market as a direct issuer, but is considering issuing a fully regulated U.S. branch settlement stablecoin.
For Tether, the regulatory requirements in the United States are a further blow, and it has not yet met these standards. Tether updated its terms of service this year.
The warning to its users: "If Tether fails to comply with the changing regulatory regime, Tether and its affiliates may face regulatory sanctions, which could adversely affect Tether and its operational capabilities."
Although the Senate's passage of the GENIUS Act marks an unprecedented policy victory for the digital asset industry, there remains significant uncertainty, as the House may have its own version, and more importantly, the accompanying legislation—a regulatory framework for other areas of cryptocurrency—is still being developed. Before the bill is approved by Trump and federal agencies issue implementation guidelines, stablecoin issuers find it difficult to obtain clear compliance guidance.
Richard Rosenthal, head of digital asset regulation at Deloitte, stated: "The future path for foreign issuers will face two unknown obstacles: 1. Under what conditions will the final laws allow foreign issuers to serve U.S. customers; 2. How to exercise the relevant regulatory discretion to allow or restrict their entry into the U.S. market. The outcome in this politically controversial area remains to be seen."
However, Freer said that House lawmakers are unlikely to lower compliance thresholds for Tether—especially in the face of the company's ally in the Trump administration, Commerce Secretary Howard Lutnick, who previously worked at brokerage Cantor Fitzgerald, overseeing Tether's U.S. reserves.
Freire stated, "I don't think the House will force any further actions against Tether." However, he added that if large non-bank competitors like Google and Amazon start launching stablecoins, "the House may be motivated to take more action on this issue."
Competitive Cycle?
The US stablecoin issuer Circle and its USDC have been looking for opportunities to capture market share from its competitor Tether. Circle also intends to participate in the anticipated wave of cryptocurrency regulation in the US. 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 out on a great opportunity.
Earlier this year, the U.S. Securities and Exchange Commission )SEC( added some stablecoins to its growing list of cryptocurrency projects, which the agency believes are not within its scope of concern. However, the SEC's statement issued some warnings regarding Tether.
Although the SEC has been led by cryptocurrency-friendly leaders since Trump's election and has excluded stablecoins from its securities jurisdiction, the SEC has also pointed out that appropriate stablecoin reserves "do not include precious metals or other cryptocurrencies," both of which are part of Tether's reserves. The "GENIUS Act" clearly states that "payment stablecoins are not securities or commodities, and authorized payment stablecoin issuers are not investment companies, but this is not yet a legal provision."
From a technical perspective, these considerations are not part of Tether's current business model, as Tether deliberately avoids direct contact with U.S. customers, at least for now.