Tether’s
is the world’s leading stablecoin. Its digital emulation of the U.S. dollar — 155 billion of them at last count — is unmatched. But as things stand, Tether almost certainly doesn’t fulfill the compliance demands of U.S. lawmakers as they’re expected to push legislation nearer to law on Tuesday afternoon.
Tether may end up with a choice to make: Jump through some serious hoops to reach compliance with the future law, or stand back and try to hold onto non-U.S. market share as the U.S. industry potentially increases in scale and the federal government takes its customary role in steering the regulatory demands of other jurisdictions around the world, according to the predictions of experts.
The Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 (GENIUS) Act is the U.S. Senate bill that’s facing its final path toward passage on Tuesday, which is a first for major crypto legislation. It then heads to the House of Representatives to be approved or to be worked on. In the end, both chambers have to OK the same language for President Donald Trump to be able to sign it into law.
In its current form, the legislation leaves a path for foreign stablecoin issuers in the U.S., but it could be a complicated one. Broadly, if companies like Tether want to offer their tokens to U.S. users, they have to be regulated by a foreign regime that’s been approved as having similar standards as the U.S. Also — depending on the final language — they would likely need to register with and be overseen by the Office of the Comptroller of the Currency, a federal banking regulator, plus maintain “reserves in a United States financial institution sufficient to meet liquidity demands of United States customers” in a collapse.
All issuers overseen by the potential law would have to follow strict reserve standards, maintaining cash, Treasuries and other related, highly-liquid assets that match their issuance one-for-one. They’d also need to be reviewed monthly by a registered public accounting firm, and the results certified by the CEO and CFO of the company, meaning the top executives would face legal liability for misleading the public. That’s an unusually robust oversight that would require more frequent public assurances from stablecoin issuers than other financial institutions.
Additionally, the companies must meet the full suite of money-laundering controls faced by U.S. financial firms.
No Rush for Tether?
“I’m if I’m Tether, I’m not going to go rushing into the United States and say, ‘I’m sure I want to be part of this, and I want to play in this game,’ until I know what the regulations are,” said Steve Gannon, a lawyer who works with digital assets clients at Davis Wright Tremaine, in a CoinDesk interview. “The downstream impact to Tether, in terms of having to comply with those regulations, could be a very considerable investment of time, effort, people, money and technology.”
In the end, Tether — one of the most lucrative businesses in the world — may continue focusing on emerging markets, where the GENIUS Act would have little sway. Tether has recently located its headquarters in crypto haven El Salvador, which is obviously not one of the global standouts in financial regulation.
Still, the U.S. legislation gives tremendous discretion to the secretary of the Treasury Department to make calls on what countries have good enough regulations and whether certain firms might be granted various exemptions.
“The Trump administration, for example, could strike a reciprocity agreement with the Bukele regime in El Salvador, where Tether is based, allowing Tether full access to the U.S. market while sidestepping the requirements of the bill,” according to talking points released by the camp of one of the bill’s chief opponents, Senator Elizabeth Warren, the ranking Democrat on the Senate Banking Committee.
“It is hard to imagine El Salvador setting up a regime that is as sophisticated and as safe as whatever the United States regime would be, even as weak as this one is,” said Corey Frayer, director of investor protection at the Consumer Federation of America and a former crypto policy adviser at the U.S. Securities and Exchange Commission. “And yet they would still be eligible, by the current set of regulators, to be granted reciprocity and treated as though they were subject to the same standards.”
Despite their strong rhetoric, Warren and her allies were unable to stop many of their Democratic colleagues from backing the bill, which the proponents argue would at least start providing oversight and controls on this key part of the industry.
The bill’s critics argue it still allows a major loophole for unregulated foreign stablecoins to be circulated on decentralized crypto platforms in the U.S.
“Unfortunately, the GENIUS Act massively expands the marketplace for stablecoins while failing to address the basic national security risks posed by them,” Warren said in a speech last week on the Senate floor. “It also includes glaring loopholes that would allow Tether, a notorious foreign stablecoin issuer now based in El Salvador, access to U.S. markets.”
Tether’s U.S. Project
However, Tether CEO Paolo Ardoino has signaled in recent weeks that the company may not try to get its market-leading token into the U.S. as a direct issuer and instead is mulling a U.S.-based offshoot settlement stablecoin that could be fully regulated domestically.
U.S. regulation would be a lot to bite off for Tether, which isn’t anywhere near checking those boxes. The company didn’t respond to a request for comment on the GENIUS Act, but Tether warned its users in its online fine print updated this year: “if Tether fails to comply with changing regulatory regimes, Tether and its affiliates may be subject to regulatory actions, which may adversely affect Tether and its ability to operate.”
While the Senate progress is a massive and unprecedented policy win for the digital assets sector, a high amount of uncertainty remains, because the House will have its own say, and the more important companion legislation — the bill that would establish regulations for the rest of the crypto space — is still being worked out. Stablecoin issuers won’t get definitive answers about their U.S. rules until a law clears Trump’s desk and the relevant federal agencies then turn it into specific regulations.
“The path forward for foreign issuers will face two hurdles, neither of which are known at present: (1) what the final law allows foreign issuers to do vis-à-vis U.S. customers, and under what conditions, and (2) how any related regulatory discretion is exercised to permit or restrict access to the U.S. market,” said Richard Rosenthal, a principal at Deloitte who focuses on digital assets regulations in the banking sector, in an email to CoinDesk. “This is a politically contentious area, and it remains to be seen how this will play out.”
However, Frayer told CoinDesk that it’s unlikely that the House lawmakers will make things less palatable for Tether — especially in the face of the company’s ally in Trump’s administration, Commerce Secretary Howard Lutnick, whose former role atop broker Cantor Fitzgerald saw him managing Tether’s U.S. reserves.
“I don’t think there’s any world where the House forces anything that takes on Tether any further,” Frayer said, though he added that if giant non-bank competitors start launching stablecoins, such as Google and Amazon, “there may be some incentive for the House to do more on that issue.”
Competition circling?
U.S. company Circle and its
have been waiting in the wings to seize market share from chief competitor Tether, and Circle intends to be inside what some expect to be a U.S. crypto surge post-regulation. If institutional investors and traditional financial firms embrace digital assets as the industry hopes, Tether could miss out on that action if it continues to stay outside of the U.S. financial system.
Earlier this year, the U.S. SEC added some stablecoins to its growing list of crypto projects that the agency sees as landing outside its area of concern. However, there was a bit of a warning sign for Tether in the agency’s statement.
Even as the regulator — run by crypto-friendly leaders since the election of Trump — dismissed stablecoins as well outside its securities jurisdiction, it indicated 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 explicitly declares that “payment stablecoins are not securities or commodities and permitted payment stablecoin issuers are not investment companies, but it’s not the law, yet.
Such considerations are technically outside of Tether’s concern in its current business model, which deliberately stays away from direct contact with U.S. customers. For now.
