Tether Faces Three-Year Deadline to Phase Out USDT in US

Tether, the issuer of the widely used stablecoin USDT, is now facing a significant regulatory challenge in the United States. The recently enacted GENIUS Act has set a three-year deadline for Tether to phase out its USDT in the U.S. market. This legislation mandates that stablecoin issuers maintain proper reserves and be transparent about how the funds are held, aiming to create a regulatory framework governing stablecoins. Tether has announced plans to issue a new U.S.-focused stablecoin to comply with the full audit requirements and anti-money laundering standards within the specified timeline.

The GENIUS Act, which passed with bipartisan support, represents a historic moment for the cryptocurrency industry in the United States. It is the first major cryptocurrency bill to become law, establishing a clear regulatory framework for stablecoins. This legislation not only sets out to create a regulatory framework governing stablecoins but also offers some protections, such as mandating stablecoin companies to maintain proper reserves and be transparent about how the money is held. The passage of the GENIUS Act marks a significant shift in the regulatory landscape for stablecoins, moving them out of the gray area and into the margins of the mainstream financial system.

Tether's response to the GENIUS Act involves a strategic pivot. The firm aims to meet the full audit requirements and anti-money laundering standards within the three-year timeline. This move is part of a broader trend where major financial centers are accelerating their pace in regulating stablecoins. The GENIUS Act's passage sends a clear signal that stablecoins are moving towards becoming a recognized part of the mainstream financial system. This regulatory shift is driven by policy forces, particularly the Trump administration's support for a market-driven digital dollar approach and opposition to Central Bank Digital Currencies (CBDCs).

The GENIUS Act's implementation will have far-reaching implications for the stablecoin market. It sets clearer regulatory boundaries for stablecoin issuers, requiring them to abide by Know Your Customer (KYC) and Anti-Money Laundering (AML) management, ensure custodial segregation of funds, and undergo third-party auditing. In extreme cases, issuance limits or usage restrictions may be set, effectively transforming stablecoins into "regulated currencies." This regulatory framework will force stablecoin issuers to focus on compliance and transparency, potentially limiting their application within the crypto circle but opening up new opportunities in the broader Web2 and global real economy.

The stablecoin market has long been dominated by Tether's USDT and Circle's USDC, representing two distinct paths: "circulation efficiency" and "compliance transparency." USDT focuses on cross-platform circulation and matching efficiency, dominating exchanges and gray settlement networks. In contrast, USDC emphasizes asset compliance and transparency, deeply cultivating regulatory-friendly scenarios and institutional client systems. The GENIUS Act's passage will likely accelerate the shift towards compliance and transparency, as stablecoin issuers seek to meet the new regulatory requirements.

The GENIUS Act's impact extends beyond the United States, serving as a reference paradigm for regulatory design in other countries. This legislation promotes the inclusion of stablecoins in the global financial policy discussion framework, potentially influencing the regulatory landscape in other regions. The path for stablecoins is changing, with an increasing number of Web2 financial companies and traditional funding forces entering the market. These emerging stablecoin projects, backed by institutional and national power, are pushing the function of stablecoins from "Web3 liquidity tools" to a value bridge connecting Web3 and the real economic system. Their use cases are gradually penetrating into supply chain finance, cross-border trade, freelance payment, over-the-counter (OTC) scenarios, and other diversified uses.

However, the GENIUS Act also brings more compliance requirements, setting clearer regulatory boundaries for stablecoin development. Issuing entities must abide by KYC/AML management, funds must have custodial segregation and third-party auditing, and in extreme cases, issuance limits or usage restrictions may be set. This means that stablecoins have gained a legal identity but have also officially stepped into the role of being "regulated currencies." Whether stablecoins can break through the application limitations of Web3 is crucial for achieving incremental landing. After all, the greatest growth potential of stablecoins lies not within the crypto circle but in the broader Web2 and the global real economy.

The GENIUS Act's passage marks a significant milestone for the cryptocurrency industry, establishing a clear regulatory framework for stablecoins in the United States. Tether's response to this legislation involves a strategic pivot towards compliance and transparency, aiming to meet the full audit requirements and anti-money laundering standards within the three-year timeline. This regulatory shift will have far-reaching implications for the stablecoin market, potentially limiting their application within the crypto circle but opening up new opportunities in the broader Web2 and global real economy. The GENIUS Act's impact extends beyond the United States, serving as a reference paradigm for regulatory design in other countries and promoting the inclusion of stablecoins in the global financial policy discussion framework.