Background The US Senate is nearing approval of the GENIUS Act, which could pose significant challenges for stablecoin issuer Tether in the US market. Tether’s USDT, the largest stablecoin by market share globally with a current issuance of $155 billion, may not meet the standards outlined in the GENIUS Act. Legal experts suggest Tether may need to wait and see, but critics of the bill argue that Tether could still find significant loopholes to attract US investors.

Potential Choices for Tether Industry experts believe Tether faces two main options: either adjust its business model to comply with US regulations or exit the US market to focus on overseas operations. The clarity provided by the US regulatory framework could potentially expand the industry’s scale and influence regulatory directions in other jurisdictions.

Compliance Requirements The current draft of the legislation provides a path for foreign stablecoin issuers to enter the US market, but the compliance procedures are complex. For example, if Tether wants to issue tokens to US users, it must:

• Be supervised by a foreign regulatory authority recognized by the US, with equivalent regulatory standards.

• Possibly register with the US Office of the Comptroller of the Currency (OCC) and be subject to its regulation.

• Hold sufficient reserve funds in US financial institutions to cover redemption needs for US customers in case of issuer bankruptcy.

The bill also imposes strict reserve management requirements on all regulated issuers, mandating that they hold high-liquidity assets such as cash and US Treasury bonds equivalent to the value of circulating tokens. Issuers must undergo monthly audits by certified public accounting firms, with audit reports signed off by the company’s CEO and CFO, making them personally liable for the authenticity of information disclosure. Notably, this regulatory framework requires more frequent information disclosure from stablecoin issuers than traditional financial institutions.

Tether’s Likely Strategy Tether may not need to rush into change. As one of the most profitable companies globally, Tether is likely to continue focusing on emerging markets, which are less affected by the GENIUS Act. It is worth noting that Tether has recently relocated its headquarters to El Salvador, a country with relatively lenient cryptocurrency policies but not yet at the international leading level in terms of financial regulatory system completeness.

However, it should be pointed out that the US bill grants the Secretary of the Treasury broad discretion, including assessing the completeness of regulatory systems in other countries and deciding whether to grant regulatory exemptions to specific companies.

Tether’s US Plans Tether CEO Paolo Ardoino recently indicated that the company may not introduce its mainstream tokens directly into the US market as an issuer, but rather consider issuing a new type of stablecoin through a fully regulated local branch in the US. The current regulatory requirements in the US are a significant challenge for Tether, as its existing business model is far from compliant. Although Tether has not commented on the GENIUS Act, it has warned users in its updated terms of service this year that failure to adapt to the changing regulatory environment could lead to regulatory sanctions and adverse impacts on the company’s operations.

Uncertainties Remain Despite the Senate’s legislative progress marking a significant policy breakthrough for the digital asset industry, uncertainties persist. The House of Representatives will propose its own version, and more crucially, the accompanying legislation for regulating other areas of cryptocurrency is still being developed. Stablecoin issuers are unlikely to receive clear compliance guidance until Trump signs the bill and federal agencies issue detailed implementation rules.

Competition and Market Dynamics Circle, the US company behind USDC, has been waiting to seize market share from its main competitor Tether and plans to participate in the anticipated post-regulation wave of the US cryptocurrency market. If institutional investors and traditional financial companies embrace digital assets as expected, and Tether remains outside the US financial system, it may miss out on opportunities.

Earlier this year, the US Securities and Exchange Commission (SEC) added some stablecoins to its growing list of cryptocurrency projects, which it considers outside its purview. However, the SEC’s statement included some warnings for Tether. Although the regulator, led by cryptocurrency-friendly leaders since Trump’s election, has 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 explicitly states that “payment stablecoins are not securities or commodities, and approved payment stablecoin issuers are not investment companies, but this is not yet a legal determination.”

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.