A New Era for Stablecoins
The cryptocurrency industry is on the brink of a transformative shift in the United States as the GENIUS Act edges closer to becoming law. This sweeping piece of legislation introduces strict regulatory safeguards for stablecoins—digital assets prized for their price stability—and seeks to bridge the gap between traditional finance and the world of decentralized currencies.
While the bill represents a major win for legitimizing crypto in the eyes of U.S. regulators, not all industry players stand to benefit equally. Chief among those at risk is Tether, the issuer of USDT, the world’s largest and most traded stablecoin.
The Clock is Ticking
Once enacted, the GENIUS Act will give stablecoin issuers between 18 and 36 months to achieve full compliance, depending on the final version adopted by Congress. The Senate’s version allows for a 36-month transition period, while the House’s STABLE Act recommends a more aggressive 18-month window. Issuers who fail to meet the new requirements by the deadline will be banned from operating within the U.S. market.
For Tether, the implications are profound. The company must make a critical decision: comply with unprecedented regulatory transparency and oversight, withdraw from the U.S. market entirely, or launch a new stablecoin designed specifically to satisfy GENIUS Act stipulations.
Tether’s Troubled Transparency Track Record
Tether has long faced criticism for its lack of financial transparency and reluctance to undergo regular audits. The issue came to a head in 2021, when the New York Attorney General’s office revealed that Tether had misrepresented the backing of its stablecoin reserves and had lent large sums to affiliated exchange Bitfinex to cover customer fund shortfalls. The investigation led to an $18.5 million settlement and a ban from serving customers in New York State.
Since then, Tether has published quarterly attestations of its reserves, but critics argue these fall short of full, independent audits by a major accounting firm. Under the GENIUS Act, that won’t be enough. Stablecoin issuers will be required to adhere to strict auditing practices, enforceable compliance protocols, and risk-mitigation measures.
Crackdown on Illicit Activity
In addition to financial transparency, the GENIUS Act mandates that all stablecoin issuers—foreign and domestic—demonstrate the technological capability to freeze and seize tokens when ordered to do so by law enforcement. Issuers must also implement robust Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures.
While Tether has made strides in this area—publicly cooperating with U.S. authorities, including the Secret Service and FBI, to freeze millions in USDT linked to illicit activity—the company must now fully institutionalize these processes to remain active in the U.S.
Could Tether Survive a U.S. Exit?
Despite the looming regulatory overhaul, Tether’s dominant position in the global stablecoin market may offer some cushion. With a circulating supply nearing 158 billion USDT, compared to 62 billion for Circle’s USDC, Tether leads by a wide margin.
Moreover, the bulk of Tether’s business lies outside the United States. Its largest markets are in Asia, Latin America, and emerging economies where access to U.S. dollars is limited. Most of Tether’s daily trading volume—over $62 billion at times—occurs on platforms like Binance, which are not U.S.-based.
Indeed, when the European Union introduced similarly stringent regulations under the Markets in Crypto-Assets (MiCA) framework, Tether opted to exit the EU market. A similar move in the U.S. would be significant, but not necessarily fatal to its business.
The Cost of Withdrawal
Nonetheless, withdrawing from the U.S. would not come without consequences. The American market offers unparalleled liquidity, access to institutional capital, and global legitimacy. Exiting would send a strong signal to investors—possibly a damaging one—that Tether cannot or will not meet the highest regulatory standards.
Such a retreat would also hand a competitive advantage to rivals like Circle, whose USDC is already compliant with most U.S. and EU regulations. Although Circle still trails Tether in market share, the optics of compliance could help it gain traction with both users and regulators.
A Case for Compromise
Despite the high stakes, insiders suggest that a total rupture between Tether and U.S. regulators is unlikely. The reconciliation process between the Senate’s GENIUS Act and the House’s STABLE Act offers room for compromise—particularly regarding compliance timelines and specific requirements for foreign issuers.
A source close to the legislative process hinted at the possibility of a negotiated middle ground, driven by economic pragmatism. Tether’s massive holdings in U.S. Treasury bills make it one of the largest single non-government buyers of American debt—exceeding even some nations.
“There’s kind of been a mutual recognition from the U.S. government as well as from Tether that they’re a bit stuck with each other,” said the source. “The demand [Tether has] for treasuries is larger than Germany. It would not be in the U.S.’s best interest to force them to divest all that by some overly stringent regulation.”
The Road Ahead
As the GENIUS Act moves through the final stages in Congress, the next few months will be critical for Tether. The stablecoin giant must weigh the cost of compliance against the risks of withdrawal and the potential of launching a new, regulatory-friendly coin tailored for the U.S. market.
Whatever choice it makes, the decision will have sweeping consequences—not just for Tether, but for the future of stablecoins and the broader crypto economy.
July 2025, Cryptoniteuae