Tether could face hurdles if proposed U.S. stablecoin regulations pass, with the possibility of having to liquidate some of its assets to align with the new rules, according to a recent JPMorgan report.
The Senate’s GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act proposes federal regulations for stablecoins with a market cap exceeding $10 billion, while the STABLE Act from the House of Representatives advocates for state-level regulation without specific conditions. JPMorgan’s report noted that both acts aim for stricter reserve requirements, with the STABLE Act permitting only U.S. T-bills, insured deposits, treasury short-term repos, and central bank reserves, while the GENIUS Act allows money market funds and reverse repos.
JPMorgan analysts led by Nikolaos Panigirtzoglou indicated that Tether, the largest stablecoin issuer with around 60% market share and a $142 billion market cap, currently meets only 66% of the STABLE Act’s reserve requirements and 83% of the GENIUS Act’s. The report also observed a decline in Tether’s compliance ratio since mid-2024, coinciding with a surge in stablecoin supply.
Under these proposed regulations, Tether would likely need to replace non-compliant assets like bitcoin, corporate paper, and precious metals with compliant assets such as U.S. Treasury bills. This could involve selling off some of its non-compliant reserves, the report noted.
Tether, which has been actively engaging with U.S. regulators, stated in an email that it is closely monitoring the situation. Despite the potential challenges, the company highlighted its $20 billion in highly liquid assets and its $1.2 billion quarterly profit from U.S. Treasuries, which it believes will help it adapt to the new requirements.
Tether’s CEO, Paolo Ardoino, responded to the JPMorgan report on social media, suggesting that the bank’s analysts were frustrated due to a lack of exposure to bitcoin. The report also pointed out that new rules requiring increased transparency and frequent reserve audits could create additional challenges for Tether.
