Tether Dual-Currency Strategy: Is USAT Compliance Just a Smoke Screen, and Is It True That USDT Will Never Be Compliant?

Writing by: Zennon Kapron, Forbes

Translation: AididiaoJP, Foresight News

In January 2026, Tether did something that seemed like a concession. It launched USAT, a U.S.-based stablecoin specifically designed to comply with the federal rules of the GENIUS Act, issued by a federally chartered bank in the United States and supervised by a Washington-approved custodian. After years of operating offshore and away from U.S. regulation, this world's largest stablecoin company finally appears to be stepping into the regulatory fold.

Tether's newly launched USAT is a "moat": a U.S. subsidiary that complies with the GENIUS Act, created specifically to keep the offshore USDT, which has a scale of $183 billion, permanently outside U.S. regulation. (Image source: Silas Stein/picture alliance via Getty Images)

But appearances can be misleading. USAT is best understood as a firewall—a compliant subsidiary whose existence is precisely to keep Tether’s core product permanently outside U.S. regulation.

Two stablecoins, two regulatory addresses

To understand what USAT is, it is issued by Anchorage Digital Bank (a federally chartered U.S. institution), with Cantor Fitzgerald serving as the designated reserve custodian, and its CEO recruited from a White House crypto role. It is a clean, domestic, fully federal framework product, and in early 2026, it received a reserve proof audited by Deloitte, one of the Big Four accounting firms.

In contrast, the original Tether USD USDT does not possess these features. It is issued offshore, with a circulation exceeding $183 billion, and its reserves include assets not permitted under the U.S. payment stablecoin system. These two stablecoins provide the same company with two different regulatory addresses: USAT is the façade presented to U.S. regulators, while USDT is its true identity retained elsewhere globally. The company has built a structure that ensures they never need to merge.

The compliance costs USDT cannot bear

This split exists because the current structure of USDT cannot meet the compliance thresholds of the GENIUS Act. The law requires payment stablecoins to be backed 1:1 by high-liquidity, high-quality assets—mainly cash, short-term government bonds, government money market funds, and similar instruments—and to publish reserve reports reviewed monthly by a registered CPA.

Tether’s own data from Q1 2026 clearly illustrates the obstacle. The company reported total assets of about $191.8 billion, corresponding to the issued tokens, with a reserve portfolio including approximately $20 billion in gold and billions of dollars in Bitcoin. These holdings make Tether extremely profitable—$1.04 billion in profit in the quarter alone, over $10 billion for the full year 2025. But these are precisely the assets that GENIUS-compliant payment stablecoins are prohibited from holding.

Bringing USDT into compliance would mean dismantling its high-yield reserve structure, which Tether has shown no willingness to pay the price for so far.

Offshore stablecoins are the systemically important ones

It’s easy to see the dual-token structure as a Washington problem solved—now there’s a compliant dollar token, serving the regulated market. This interpretation overlooks what is truly important about USDT.

USDT’s focus is far outside the U.S., in a world with dollar shortages. In Argentina, Turkey, Nigeria, Vietnam, and many other economies with weak local currencies and difficulty obtaining physical dollars, USDT acts as a savings tool and settlement channel, often more reliable than local banking systems. This token, with a circulation exceeding $183 billion, is, by any reasonable definition, a systemically important tool in global dollar usage.

The structure built by Tether permanently places this tool outside U.S. supervision. USAT will undergo audits, proofs, and oversight, while USDT—the token flowing in fragile economies—does not need to, because it doesn’t have to. Its users are outside the U.S., issued offshore, and the GENIUS framework targets service providers in the U.S., not foreign holders. For U.S. policymakers, this is an awkward passive situation: the penetration of dollars into developing countries is increasingly achieved through a private token that the U.S. government cannot regulate or audit, and the design of the GENIUS transformation also provides Tether with a legitimate reason to remain offshore.

What would a compliant version look like?

Careful consideration of what it takes to bring USDT into the GENIUS system reveals the shape of the dual-token structure. A compliant USDT would have to sell off its gold and Bitcoin holdings, converting the proceeds into cash and short-term government bonds; it would need to undergo monthly audits by a CPA and be supervised by U.S. regulators. In this process, it would shift from a high-yield, multi-asset-based portfolio to a narrow monetary market structure earning only government bond yields.

This transformation would entail enormous financial costs and even greater strategic costs. The distance between Tether and U.S. banks and regulators is precisely why it is valuable to its core users—those operating outside the flawed financial system. A USDT that obeys U.S. regulators would become a fundamentally different product, with a changed value proposition, likely losing its offshore foundation. Facing this prospect, Tether’s decision to create an independent compliant coin is the only way to preserve both businesses.

Tether claims USDT is moving toward compliance

Tether does not describe the situation as I have above. Its official statement says that USDT "continues to operate globally" and is "making progress toward GENIUS Act compliance." This is the company's official stance, worth fairly citing and honestly weighing.

But in light of the actual structure, this claim is hard to sustain. "Moving toward compliance" and creating an independent compliant coin are two different things, and Tether has chosen the latter. If USDT were truly on the path to GENIUS compliance, USAT would become redundant— a company would not establish a bank relationship, recruit a Washington-background CEO, and commission Big Four audits for a second dollar token while the first is already on track. The effort invested in USAT itself demonstrates the company’s expectation: USDT will remain offshore.

The real test comes in the 2028 deadline

This arrangement is time-limited. Under the GENIUS framework, U.S. digital asset service providers face a transition period, after which they can only offer stablecoins approved under the federal system. In practice, by mid-2028, U.S. exchanges and custodians will have to delist any unapproved dollar tokens.

If USDT remains unapproved by then, U.S. platforms will cease to list it—precisely the moment the dual-token strategy is designed to address: USAT inherits the U.S. market, taking on compliance traffic and regulatory burdens; USDT retains its offshore base—including emerging market users, dollar-short economies, trading pairs outside U.S. jurisdiction, and its profitable reserve structure. Tether will not lose anything it cannot afford because USAT was always meant to handle the compliant part of the business.

Law enforcement tools are limited

A natural reaction is that U.S. authorities could enforce USDT compliance or cut off its channels. But the actual leverage is much less than imagined. As an offshore company, Tether’s issuance does not rely on U.S. banks like USAT does, and most of its users are foreign citizens, beyond the scope of U.S. consumer regulation. The GENIUS transformation gives Washington a tool to remove USDT from U.S.-regulated platforms, but it regulates the U.S. market, not the token’s global circulation.

Removing USDT from U.S. exchanges, if anything, would further reinforce the design of Tether’s separation: the compliant coin retains the regulated domestic market, while the offshore coin maintains a larger and faster-growing overseas base. Enforcement actions targeting the U.S. market cannot make the offshore coin comply, and Tether has built a structure that allows it to remain outside regulation.

Tether has become a significant force in the Treasury market

The impact of the dual-token structure extends beyond stablecoin policy into the U.S. government debt market. Tether’s reserves are highly concentrated in U.S. Treasuries, and the company claims in its USAT announcement to be the 17th largest holder of U.S. debt globally, surpassing countries like Germany and South Korea. Most of this exposure is behind the offshore stablecoin USDT.

A private offshore company has become a major source of demand for short-term U.S. government debt, and this demand grows with USDT’s expansion. Washington benefits from this because every dollar of USDT in circulation effectively lends an additional dollar to the Treasury. But there is no supervisory relationship between Washington and this lending entity.

The firewall design locks in this arrangement. As USDT continues to expand offshore, its footprint in U.S. Treasuries also grows, making the U.S. increasingly dependent on a demand it cannot regulate. USAT’s compliant reserves will be within a supervised system, while USDT’s much larger reserve base remains outside. This debt, held in large quantities by Tether, is given a legal justification by the GENIUS transformation’s design, which allows Tether to keep a larger reserve pool outside regulation.

Why the framework matters

This is not an accusation of Tether’s illegality. Operating a compliant subsidiary in the U.S. while maintaining an offshore parent is a common and legal corporate structure in many industries. Regulators and media should stop describing USAT as "Tether entering compliance," because that framing completely reverses the strategy.

The real role of USAT is: to allow the world’s most systemically important stablecoin to remain outside U.S. regulation at any time Tether chooses, while a smaller, cleaner "sister coin" bears the scrutiny. The real question in 2028 is not whether Tether will be compliant—it has already designed the answer. Instead, it is: what does it mean that this largest dollar tool, outside the banking system, is deliberately and structurally placed outside the jurisdiction of the currency-issuing country?