Tether May Need to Liquidate Reserves to Meet New U.S. Stablecoin Regulations: JPMorgan
Company data suggests Tether’s reserves are only 66% compliant with the STABLE Act and 83% under the GENIUS Act.
Key Points:
- Tether might encounter difficulties with proposed U.S. stablecoin regulations.
- JPMorgan reports that Tether’s reserves show only 66% compliance with the STABLE Act and 83% compliance with the GENIUS Act.
- A representative from Tether stated that adapting to these new requirements will be straightforward.
The issuer of USDT, Tether, could face significant challenges if the proposed U.S. legislation regarding stablecoins is passed. According to a report by Wall Street bank JPMorgan, Tether may have to liquidate some of its reserves to align with these regulations.
The Senate’s GENIUS Act calls for federal regulation concerning stablecoins exceeding a market cap of $10 billion, while the House’s STABLE Act suggests state regulation without conditions.
“Reserve requirements under the STABLE Act are stricter, allowing insured deposits, U.S. treasury bills, and other liquid assets,” the analysts noted. Both bills limit reserves to high-quality, liquid assets only.
Tether currently leads the stablecoin market with a 60% share, but JPMorgan indicates that its reserves are declining in compliance since mid-2024, as the supply of stablecoins has surged.
Should these regulations be enforced, Tether is expected to replace non-compliant assets with compliant ones, suggesting sales of existing non-compliant assets like precious metals or Bitcoin, and purchasing compliant assets such as treasury bills.
Despite these challenges, JPMorgan has noted that Tether’s equity exceeds $20 billion in liquid assets, generating substantial profits.
A Tether spokesperson indicated that they are actively monitoring the progression of U.S. stablecoin legislation and engaging with regulators. The final regulation’s direction remains unclear.
Tether’s CEO, Paolo Ardoino, remarked in a tweet that JPMorgan’s analysts are not favorably inclined towards Bitcoin.
New regulations seeking improved transparency and rigorous reserve audits could further complicate Tether’s operations, the report elaborated.
Read more:
Stablecoin Regulations Could Pose Problems for Tether, JPMorgan Says; USDT Issuer Claims Sour Grapes
