Proposed U.S. Stablecoin Regulations Could Impact Tether's Operations

According to CoinDesk, Tether, the issuer of USDT, may encounter significant challenges if the proposed U.S. stablecoin regulations are enacted. A research report by JPMorgan highlighted that Tether might need to liquidate some of its reserves to comply with the new rules. The Senate's Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act proposes federal regulation for stablecoins with a market cap exceeding $10 billion. It allows for state regulation if it aligns with federal guidelines. In contrast, the House of Representatives' STABLE Act advocates for state regulation without conditions. The STABLE Act imposes stricter reserve requirements, permitting only insured deposits, U.S. T-bills, treasury short-term repos, and central bank reserves. The Senate bill also allows money market funds and reverse repos. Both bills restrict reserves to high-quality, liquid assets. Tether currently holds a dominant 60% market share in the stablecoin sector, with USDT's market cap around $142 billion. JPMorgan's analysis indicates that Tether's reserves are only 66% compliant with the STABLE Act and 83% with the GENIUS Act, based on the company's reports. The bank noted a declining compliance ratio since mid-last year as the stablecoin supply increased. To meet the proposed regulations, Tether would need to replace non-compliant assets with compliant ones, potentially selling assets like precious metals, bitcoin, corporate paper, secured loans, and other investments, while acquiring compliant assets such as T-bills. A Tether spokesperson stated that the company is closely monitoring the development of U.S. stablecoin legislation and actively engaging with local regulators. They emphasized the need for industry consultation and noted the uncertainty over which bill will advance. Despite potential challenges, JPMorgan downplayed concerns, citing Tether's Group equity of over $20 billion in liquid assets and quarterly profits exceeding $1.2 billion from U.S. Treasuries, suggesting that adapting to new requirements would be manageable. Tether CEO Paolo Ardoino responded to the report on X, suggesting that JPMorgan analysts are biased due to their lack of bitcoin ownership. The report also mentioned that new regulations demanding increased transparency and more frequent reserve audits could further challenge Tether's operations.