Tether Faces U.S. Exit as Congress Moves to Regulate Stablecoins

The U.S. Congress is on the verge of passing the "GENIUS Act," a legislation that aims to integrate stablecoins into the mainstream financial system. This move has garnered significant attention from various sectors, including startups, banks, and major corporations like Walmart. The Act mandates that stablecoin issuers must maintain reserves of safe assets such as cash and short-term U.S. Treasury bonds. Additionally, large issuers are required to disclose audited annual financial reports, presenting a substantial challenge for Tether, which holds a dominant 66% share of the stablecoin market with a circulation of $156 billion.

Tether's USDT is currently backed by a mix of assets, including Bitcoin and gold, and the company has historically been reluctant to fully disclose its financial details. This lack of transparency could potentially lead to Tether being unable to continue its operations in the U.S., according to Scott Armstrong, a former federal prosecutor with experience in crypto cases. Tether representatives have not responded to requests for comment, but CEO Paolo Ardoino has previously hinted at the possibility of issuing a localized stablecoin to maintain operations in the U.S.

The "GENIUS Act" includes a compliance grace period. The Senate version of the Act offers a 3-year grace period, while the accompanying bill under House review requires compliance within 18 months. For the Act to come into effect, it ultimately needs the signature of President Trump, who has expressed support for the legislation. This development underscores the regulatory scrutiny that stablecoin issuers, particularly those with significant market shares like Tether, are facing as they navigate the evolving landscape of digital currencies and financial regulations.