Tether may be required to sell certain assets—including Bitcoin, precious metals, corporate paper, and secured loans—to comply with proposed U.S. stablecoin regulations, according to analysts at JPMorgan.
Two stablecoin bills have been introduced in Congress: the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act in the House and the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in the Senate. These proposals seek to regulate stablecoin issuers with stricter licensing, risk management, and 1:1 reserve backing requirements.
JPMorgan analysts, led by Nikolaos Panigirtzoglou, reported on Wednesday that under the STABLE Act, only 66% of Tether’s reserves would be compliant, while 83% would meet the standards set by the GENIUS Act. This marks a decline in compliance since mid-2024 as stablecoin supply has increased.
Tether currently holds 83,758 BTC, valued at over $8 billion, as part of its reserves, based on a Bitcoin address confirmed by The Block in 2023. The company first announced in 2023 that it would allocate up to 15% of quarterly profits toward Bitcoin purchases.
Last month, Tether published its Q4 2024 attestation report, revealing that its reserve buffer had surpassed $7 billion for the first time and that the company had generated $13 billion in profits for the year.
Regulatory Challenges for Tether
The STABLE Act would impose stricter reserve requirements and allow state-level oversight, while the GENIUS Act mandates federal regulation for large issuers and permits a broader range of reserve assets. If either bill becomes law, analysts say Tether may have to restructure its reserves, shifting holdings into U.S. Treasuries and other liquid assets.
Tether, which controls nearly 60% of the stablecoin market, has already faced regulatory hurdles in Europe under the Markets in Crypto-Assets (MiCA) framework, requiring 60% of reserves to be held in EU banks. This led to its delisting from several European exchanges, though its market share in the region remains relatively small.
However, the U.S. market poses a greater challenge due to Tether’s significant presence. Analysts warn that stricter regulations, increased transparency, and frequent reserve audits could pressure Tether’s dominance.
“U.S. stablecoin regulations requiring more transparency and frequent reserve audits pose additional challenges to Tether,” they noted.
These proposed stablecoin regulations are expected to be enacted later this year.