Key Notes

Key Notes:

Tether is likely to face regulatory pressure in the US over new stablecoin rules.The stablecoin issuer holds many reserve assets that new laws may not recognize.Regulatory headwinds forced it out of the EU, will the same happen in the US?.

Tether Holdings Limited, the biggest stablecoin issuer, may face pressure to restructure its reserves soon. This is because the United States Congress has recently proposed two new stablecoin bills for the asset class. The proposed bills aim for stricter rules on licensing, reserve transparency, and risk management for stablecoin issuers.

According to The Block, analysts at JPMorgan, led by Nikolaos Panigirtzoglou, believe Tether may need to sell some of its non-compliant assets. The stablecoin issuer backs USDT USDT $1.00 24h volatility: 0.1% Market cap: $142.50 B Vol. 24h: $21.07 B with a mix of assets, including Bitcoin BTC $96 656 24h volatility: 1.2% Market cap: $1.92 T Vol. 24h: $18.59 B , precious metals, corporate paper, and secured loans

These regulations could impact Tether’s reserve structure and overall market stability if approved.

The two proposed bills include the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act in the House; and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act in the Senate.

The STABLE Act pushes for stricter state-level oversight, while the GENIUS Act enforces federal regulation but allows a broader range of reserve assets. Both aim to tighten control over how stablecoins are issued and managed.

Per JPMorgan’s report, only 66% of Tether’s reserves are currently considered compliant under the STABLE Act. Meanwhile, the GENIUS Act recognizes 83% of its reserves as meeting the necessary standards.

These show a worrying decline in compliance since mid-2024, especially as the stablecoin market has expanded significantly. Tether’s reserves are important to its operations. The company currently holds 83,758 BTC, worth over $8 billion, as part of its reserves.

If either bill becomes law, Tether may need to divest these holdings. JPMorgan analysts worry that Tether selling off its mix of reserve assets might not meet the high standards these proposed bills require.

Both bills propose requiring stablecoin issuers to have more liquid and stable reserves, such as the US Treasuries. This could force Tether to restructure its holdings. Market experts fear such a large Bitcoin sell-off could negatively impact Bitcoin’s price and create market volatility.

Tether’s trading volume dominance in the over $120 billion stablecoin market could be tested. This comes as regulatory pressure mounts even beyond the US. In Europe, regulations like MiCA require large stablecoin issuers to keep 60% of their reserves in EU-based banks.

As reported by Coinspeaker, the EU’s MiCA rules, which Tether criticized, have forced major exchanges to delist USDT. This had a minimal impact since Tether has a small European market share.

However, US regulations could cause much bigger problems for stablecoin issuers. Like the two recent proposed bills, stability rules could force them to adjust their operations and reserves.

On the bright side, both bills aim to increase transparency in the stablecoin market. It gears to ensure that issuers like Tether maintain assets that are easier to liquidate if necessary. Everyone is watching Tether to see how it navigates these challenges. As a leader in the stablecoin market, its decisions could set the standard for the entire altcoin market.

Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.

Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.

Godfrey Benjamin on X

Julia Sakovich on X