Ah, the winds of change are blowing through the stablecoin market, and Tether Holdings Limited, the biggest stablecoin issuer, may soon feel a gust. The United States Congress has proposed two new stablecoin bills, which aim to tighten the reins on licensing, reserve transparency, and risk management for stablecoin issuers.
The Bills that Could Put Tether Bitcoin Holdings at Risk
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 with a mix of assets, including Bitcoin, precious metals, corporate paper, and secured loans.
These new regulatory proposals 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.
Tether Stablecoin Regulation Struggle
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.
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2025-02-13 17:44