Tether Braces for U.S. Stablecoin Regulations: JPMorgan Warns of Operational Challenges

Tether, the issuer of the world's largest stablecoin, USDT, may need to adjust its reserves to comply with upcoming U.S. regulations on stablecoins. According to a research report by JPMorgan, Tether could face operational challenges if the proposed rules come into effect.

The Senate's GENIUS Act and the House of Representatives' STABLE Act are both targeting stablecoin issuers. The GENIUS Act focuses on federal regulation for stablecoins with a market cap over $10 billion, while the STABLE Act proposes state regulation. Both bills require high-quality and liquid assets for reserves.

Tether, with a 60% market share in the stablecoin sector and a market cap of approximately $142 billion, was reported to have reserves that are 66% compliant under the STABLE Act and 83% under the GENIUS Act. To align with the proposed regulations, Tether would need to replace non-compliant assets with compliant ones, potentially leading to sales of non-compliant assets like precious metals, bitcoin, corporate paper, and secured loans.

In response to the JPMorgan report, a Tether spokesperson stated that the company is actively engaging with regulators and monitoring the progress of U.S. stablecoin bills. Tether's CEO, Paolo Ardoino, dismissed the concerns raised by JPMorgan, claiming that the bank's analysis overlooks Tether's substantial group equity and liquid assets, which he believes would make adapting to new regulations straightforward.

The proposed stablecoin regulations, expected to be enacted later this year, could present significant challenges for Tether, according to JPMorgan analysts. However, Tether remains engaged with regulatory developments and has not yet commented on whether it will need to sell bitcoin or other assets to comply with the potential new laws.

Tether currently holds a significant amount of bitcoin in its reserves, which it began purchasing as part of a profit allocation strategy announced in 2023.