The GENIUS Act is nearing Senate approval; what is its impact on Tether?

Source: Can Tether's Dominance Survive the U.S. Stablecoin Bill?

Compiled & Edited by: Lenaxin, ChainCatcher

Summary

• Stablecoin issuer Tether may soon face significant difficulties in the U.S. market, as its USDT may not meet the standards outlined in the Senate's "GENIUS Act."
• Legal experts suggest that Tether may need to take a wait-and-see approach, but critics of the bill believe that Tether will still find significant loopholes to attract U.S. investors.

USDT issued by Tether is the largest stablecoin by market share globally. Latest data shows that its supply pegged to the US dollar has reached $155 billion. However, analysts point out that Tether's current model may struggle to meet the upcoming regulatory requirements in the United States. The US Senate will conduct a final review of the "2025 U.S. Stablecoin National Innovation and Establishment Act" (GENIUS Act) on Tuesday, which will be the first federal bill in the cryptocurrency space to enter the legislative process. The bill will then be submitted to the House of Representatives for review, and it must be agreed upon by both chambers before being signed into law by the President.

Industry experts believe that Tether may face two choices: adjust its business model to comply with new US regulations, or exit the US market to focus on overseas operations. The clarification of the US regulatory framework could drive the expansion of the industry while influencing the regulatory direction of other jurisdictions.

The current legislative draft provides a pathway for foreign stablecoin issuers to enter the U.S. market, but the compliance procedures are quite complex. According to the draft, if companies like Tether intend to issue tokens to U.S. users, they must meet the following conditions: first, they must be subject to the supervision of a foreign regulatory authority recognized by the U.S., and its regulatory standards must be comparable to those of the U.S.; second, they may need to register with and be regulated by the Office of the Comptroller of the Currency (OCC); finally, they must also hold sufficient reserves in U.S. financial institutions to ensure that redemption demands from U.S. customers can be met in the event of the issuer's bankruptcy.

The bill imposes strict reserve management requirements on all regulated issuers: they must hold cash and high-liquid assets such as U.S. Treasury bonds equivalent to the value of circulating tokens. In terms of compliance mechanisms, issuers must undergo audits by registered accounting firms on a monthly basis, and the audit reports must be certified by the company's CEO and CFO, meaning that executives will bear personal legal responsibility for the authenticity of information disclosure. It is noteworthy that this regulatory framework sets more frequent information disclosure obligations for stablecoin issuers compared to traditional financial institutions.

In addition, according to the requirements of the bill, relevant enterprises must also fully comply with anti-money laundering regulatory requirements applicable to U.S. financial institutions.

Tether does not need to rush for change?

"If I were Tether, I wouldn't rashly enter the U.S. saying, 'I definitely want to get involved, I want to be part of it,' unless I understand the relevant regulations," said Steve Gannon, a digital asset client attorney at Davis Wright Tremaine, in an interview with CoinDesk. "In terms of compliance with these regulations, the downstream impact on Tether could involve significant investments of time, energy, manpower, capital, and technology."

As one of the most profitable companies globally, Tether is likely to continue focusing its strategic efforts on emerging markets, which are relatively less affected by the GENIUS Act. Notably, Tether recently relocated its headquarters to El Salvador, a country where the financial regulatory framework has not yet reached international standards.

However, it should be noted that the U.S. legislation grants the Secretary of the Treasury broad discretion, including the authority to assess the completeness of regulatory systems in various countries and to decide whether to grant regulatory exemptions to specific enterprises.

"For example, the Trump administration could reach a reciprocal agreement with the Bukele regime in El Salvador, where Tether is headquartered, allowing Tether full entry into the U.S. market while circumventing the requirements of the legislation," according to talking points released by the camp of one of the main opponents of the bill, Senate Banking Committee 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 SEC, pointed out: "Even though El Salvador's current regulatory system is not perfect, it is hard to imagine that it can achieve the same level of soundness and security as the U.S. However, under the existing regulatory framework, the country may still receive reciprocal treatment and enjoy standards comparable to those in the U.S."

Despite Senator Warren and her allies holding a strong opposing stance, they failed to prevent numerous Democratic colleagues from supporting the bill. Supporters believe it at least establishes a preliminary regulatory framework for the key area of stablecoins.

Critics point out that the bill still has significant loopholes that may allow unregulated foreign stablecoins to circulate through decentralized crypto platforms in the United States.

Warren stated during a speech in the Senate last week: "Unfortunately, the GENIUS Act significantly expands the market for stablecoins without addressing the fundamental national security risks it poses. The bill also has obvious loopholes that allow Tether, a notorious foreign stablecoin issuer now headquartered in El Salvador, to enter the U.S. market."

) Tether's US Plans

However, Tether CEO Paolo Ardoino recently said that the company may not introduce its mainstream token to the U.S. market as a direct issuer, but will instead consider issuing a new stablecoin through a fully U.S.-regulated local branch.

For Tether, the current regulatory requirements in the United States are indeed an added burden, and its existing business model has not yet met compliance standards. Although the company has not commented on the GENIUS Act, it has already warned users in the updated terms of service this year: "If Tether fails to adapt to the continuously changing regulatory environment, it may face regulatory sanctions, which could adversely affect the company's operations."

Although the Senate's legislative process marks a significant policy breakthrough for the digital asset industry, uncertainty remains: the House will propose its own version, and more critically, the accompanying legislation - the regulatory framework for other cryptocurrency areas - is still being developed. Before Trump signs the bill and federal agencies issue implementation guidelines, stablecoin issuers find it difficult to obtain clear compliance guidance.

Richard Rosenthal, head of Deloitte's digital asset regulatory practice, pointed out in an email to CoinDesk: "Foreign issuers face two significant unclear obstacles: one is under what conditions the law will ultimately allow them to serve U.S. clients; the other is how regulatory agencies will exercise discretion in controlling market access. The final direction of this politically sensitive area remains to be seen."

However, Furrer told CoinDesk that it is unlikely that House members will lower the compliance thresholds for Tether—especially in the face of the company's allies in the Trump administration, such as Howard Lutnick, a former executive at Cantor Fitzgerald who managed Tether's U.S. Treasury reserves and is now the Secretary of Commerce.

Freyer stated, "I don't think the House will force any further action against Tether." However, he added that if large non-bank competitors like Google and Amazon start launching stablecoins, "the House may have the motivation to take more action on this issue."

Competitive Cycle?

The American company Circle and its USDC have been looking for opportunities to seize market share from its main competitor Tether. Circle also intends to participate in the expected wave of cryptocurrency regulation in the United States. If institutional investors and traditional financial companies embrace digital assets as the industry hopes, while Tether remains outside the American financial system, it may miss out on a significant opportunity.

Earlier this year, the U.S. Securities and Exchange Commission ### SEC ( added some stablecoins to its growing list of cryptocurrency projects that the agency believes are not within its purview. However, the agency's statement issued some warnings regarding Tether.

Although the regulatory agency — which has been 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 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. clients. At least for now.