- The proposed GENIUS Act could bar Tether from operating in the US.
- The bill imposes strict requirements on reserves, audits, and redemption.
- Tether’s current practices appear to fall short of the proposed standards.
Tether’s US operations face a significant hurdle with the potential enactment of Senator Hagerty’s GENIUS Act. This bill, aimed at bringing stablecoin issuers like Tether (USDT) and USD Coin (USDC) under Federal Reserve oversight.
Backed by Senators Scott, Gillibrand, and Lummis, the bill establishes federal rules for stablecoin issuers over $10 billion, and state regulations for smaller issuers. Hagerty says the bill fits with Trump’s crypto vision, ensuring U.S. dollar dominance in digital finance. Senate staff expect swift movement through committees, with the White House signaling support for stablecoin legislation.
“This bill is similar to the Clarity Act in the House and is a priority for the Congress and Trump Admin to pass this term.”
However, some believe that the bill would effectively prevent Tether from operating within the US. As per the analyst, the proposed legislation would impose stringent requirements that Tether currently might be unable to meet.
These include mandatory authorization by the Comptroller of the Currency for issuers with over $10 billion in reserves, regular attestations from a US public accounting firm with CEO and CFO signatures subject to criminal penalties, and restrictions on reserve assets to US Treasury bills, cash, and reverse repos.
Compliance with these requirements presents significant hurdles for Tether. Its current practices, such as using a foreign auditor, holding a substantial portion of reserves in assets other than cash and US Treasury bills, and its approach to reserve segregation, appear to fall short of the proposed standards.
Hoskinson: Tether Could Buy Its Way to Compliance
On the other hand, opponents of the bill argue that it stifles innovation and paves the way for a central bank digital currency (CBDC) through stablecoins.
This is everything you need to know about the GENIUS Act. This bill stifles free-market innovation, gives power to large banks and regulators, effectively destroys algorithmic stablecoins, and provides a glide path for a CBDC via stablecoins.
Cardano Founder Charles Hoskinson suggested that Tether with its $13 billion annual profit, could leverage its financial strength and acquire existing entities that already meet regulatory standards. This would allow them to offer a compliant stablecoin within the US market.
While Tether’s future plans are unclear, the GENIUS Act could indelibly reshape the stablecoin industry and the entities operating within it.