The GENIUS Act: A Major Hurdle for Tether's US Operations

Tether's US operations face a significant hurdle with the potential enactment of Senator Hagerty's GENIUS Act. This bill, aimed at bringing stablecoin

Senator Hagerty’s GENIUS Act poses a substantial challenge to Tether's US operations. The bill aims to place stablecoin issuers like Tether (USDT) and USD Coin (USDC) under the supervision of the Federal Reserve.

Backed by Senators Scott, Gillibrand, and Lummis, the bill outlines federal regulations for stablecoin issuers with over $10 billion and state regulations for smaller issuers. According to Hagerty, the bill aligns with Trump’s crypto vision, ensuring U.S. dollar dominance in digital finance. Senate staff anticipate rapid progress through committees, with the White House expressing support for stablecoin legislation.

“This bill is similar to the Clarity Act in the House and a priority for the Congress and Trump Admin to pass this term.”

However, some believe that the bill would essentially prevent Tether from operating in the US. The proposed legislation would impose stringent requirements that Tether might not currently be able to meet, an analyst noted.

These include mandatory authorization by the Comptroller of the Currency for issuers with over $10 billion in reserves, regular attestations from a US public accounting firm with CEO and CFO signatures subject to criminal penalties, and restrictions on reserve assets to US Treasury bills, cash, and reverse repos.

Compliance with these requirements presents significant hurdles for Tether. Its current practices, such as using a foreign auditor, holding a substantial portion of reserves in assets other than cash and US Treasury bills, and its approach to reserve segregation, appear to fall short of the proposed standards.

Hoskinson: Tether Could Buy Its Way to Compliance

Opponents of the bill, on the other hand, argue that it stifles innovation and paves the way for a central bank digital currency (CBDC) through stablecoins.

This is everything you need to know about the GENIUS Act. This bill stifles free-market innovation, gives power to large banks and regulators, effectively destroys algorithmic stablecoins, and provides a glide path for a CBDC via stablecoins.

Cardano Founder Charles Hoskinson suggested that Tether with its $13 billion annual profit, could use its financial strength to acquire existing entities that already meet regulatory standards. This would allow them to offer a compliant stablecoin within the US market.

While Tether's future plans are uncertain, the GENIUS Act could indelibly reshape the stablecoin industry and the entities operating within it.