A quiet Tuesday afternoon in Washington could reshape the digital dollar landscape. The U.S. Senate is moving a major stablecoin bill closer to law. This legislation, known as the GENIUS Act, aims to bring order to a part of crypto that has grown very large, very fast. It could mean big changes for the world’s leading stablecoin, Tether.
- The GENIUS Act aims to regulate stablecoins, potentially impacting Tether’s operations.
- Tether faces a choice: comply with U.S. regulations or focus on markets outside the U.S.
- The bill grants the Secretary of the Treasury Department significant power in overseeing stablecoin regulations.
Tether’s USDT token is a giant. It holds an astonishing $155 billion, a digital version of the U.S. dollar. But as things stand today, Tether almost certainly does not meet the compliance rules U.S. lawmakers are putting in place. This creates a fascinating dilemma for the company.
Tether may soon face a clear choice. It could jump through some serious hoops to meet the new U.S. law. Or, it could step back and focus on its market share outside the U.S. Experts suggest this is the path ahead. The U.S. industry could grow a lot under new rules. And the federal government often sets the tone for regulations around the world.
The New Rulebook: What the GENIUS Act Demands
The Guiding and Establishing National Innovation for U.S. Stablecoins of 2025, or GENIUS Act, is the U.S. Senate bill now on its final path toward passage. This is a first for major crypto legislation. After the Senate, it goes to the House of Representatives for approval or further work. Both chambers must agree on the same language before President Donald Trump can sign it into law.
The bill, in its current form, does offer a way for foreign stablecoin issuers to operate in the U.S. But it looks like a complicated path. Companies like Tether, if they want to offer their tokens to U.S. users, would need to be regulated by a foreign system. This system would need to be approved by the U.S. as having similar standards.
Beyond that, depending on the final wording, these companies would likely need to register with and be overseen by the Office of the Comptroller of the Currency (OCC), a federal banking regulator. They would also need to keep “reserves in a United States financial institution sufficient to meet liquidity demands of United States customers” in case of a collapse.
Any issuer under this potential law would follow strict reserve standards. They would need to hold cash, U.S. Treasury bonds, and other very liquid assets. These assets must match their issued stablecoins one-for-one. It’s like keeping exactly enough cash in the vault for every dollar bill you print.
These companies would also face monthly reviews by a registered public accounting firm. The company’s CEO and CFO would need to certify the results. This means top executives would face legal responsibility for misleading the public. It’s a very strong level of oversight. It asks for more frequent public assurances from stablecoin issuers than from many other financial institutions.
In addition, these companies must meet all the money-laundering controls that U.S. financial firms follow. This includes knowing your customers and reporting suspicious activity. It’s a full package of compliance.
Tether’s Tightrope: Global Reach or U.S. Compliance?
Steve Gannon, a lawyer who works with digital assets clients at Davis Wright Tremaine, shared his thoughts in a CoinDesk interview. He said, “I’m if I’m Tether, I’m not going to go rushing into the United States and say, ‘I’m sure I want to be part of this, and I want to play in this game,’ until I know what the regulations are.” He added that meeting these rules could be a very big investment of time, effort, people, money, and technology for Tether.
Tether is one of the most profitable businesses in the world. It may simply keep its focus on emerging markets. The GENIUS Act would have little power there. Tether recently set up its headquarters in El Salvador, a country known as a crypto haven. It is not, by any stretch, a global leader in financial regulation.
Still, the U.S. legislation gives the Secretary of the Treasury Department a lot of power. This official can decide which countries have good enough regulations. They can also grant certain firms various exemptions. This adds a layer of political intrigue to the whole situation.
Senator Elizabeth Warren, a chief opponent of the bill, has raised concerns. Her camp released talking points suggesting the “Trump administration, for example, could strike a reciprocity agreement with the Bukele regime in El Salvador, where Tether is based, allowing Tether full access to the U.S. market while sidestepping the requirements of the bill.”
Corey Frayer, director of investor protection at the Consumer Federation of America and a former crypto policy adviser at the U.S. Securities and Exchange Commission (SEC), weighed in. He found it “hard to imagine El Salvador setting up a regime that is as sophisticated and as safe as whatever the United States regime would be, even as weak as this one is.” Yet, he noted, they could still be eligible for reciprocity.
Warren and her allies spoke strongly against the bill. But they could not stop many of their Democratic colleagues from supporting it. Proponents argue the bill would at least start providing oversight and controls on this key part of the industry. Critics, however, say it still leaves a major loophole. Unregulated foreign stablecoins could still circulate on decentralized crypto platforms in the U.S.
Senator Warren spoke on the Senate floor last week. She said, “Unfortunately, the GENIUS Act massively expands the marketplace for stablecoins while failing to address the basic national security risks posed by them.” She added that it “also includes glaring loopholes that would allow Tether, a notorious foreign stablecoin issuer now based in El Salvador, access to U.S. markets.”
The Shifting Sands of Competition
Despite the criticisms, Tether CEO Paolo Ardoino has sent signals in recent weeks. He suggests the company may not try to bring its market-leading token directly into the U.S. Instead, Tether is considering a U.S.-based offshoot settlement stablecoin. This new token could be fully regulated domestically. It’s a clever way to approach a tricky market.
U.S. regulation would be a lot for Tether to take on. The company is not close to meeting those standards right now. Tether did not respond to a request for comment on the GENIUS Act. But it did warn its users in its online fine print updated this year. It stated, “if Tether fails to comply with changing regulatory regimes, Tether and its affiliates may be subject to regulatory actions, which may adversely affect Tether and its ability to operate.”
The Senate’s progress is a huge and new policy win for the digital assets sector. But a lot of uncertainty remains. The House will have its own say. And other important legislation, the bill that would set rules for the rest of the crypto space, is still being worked out. Stablecoin issuers won’t get clear answers about their U.S. rules until a law clears President Trump’s desk. Then, the relevant federal agencies must turn it into specific regulations.
Richard Rosenthal, a principal at Deloitte who focuses on digital assets regulations in the banking sector, sent an email to CoinDesk. He explained that the path for foreign issuers faces two hurdles. Neither is known yet. One is what the final law allows foreign issuers to do with U.S. customers, and under what conditions. The second is how any related regulatory power is used to permit or restrict access to the U.S. market. He noted, “This is a politically contentious area, and it remains to be seen how this will play out.”
Corey Frayer told CoinDesk he thinks it’s unlikely House lawmakers will make things less palatable for Tether. This is especially true given the company’s ally in President Trump’s administration, Commerce Secretary Howard Lutnick. Lutnick’s former role atop broker Cantor Fitzgerald saw him managing Tether’s U.S. reserves. “I don’t think there’s any world where the House forces anything that takes on Tether any further,” Frayer said.
However, Frayer added a thought. If giant non-bank competitors like Google and Amazon start launching stablecoins, “there may be some incentive for the House to do more on that issue.” This suggests a new kind of pressure could emerge.
U.S. company Circle and its USDC stablecoin have been waiting in the wings. They hope to take market share from Tether, their chief competitor. Circle intends to be inside what some expect to be a U.S. crypto surge after regulation. If institutional investors and traditional financial firms truly embrace digital assets, Tether could miss out on that action. This would happen if it continues to stay outside the U.S. financial system.
Earlier this year, the U.S. SEC added some stablecoins to its growing list of crypto projects. The agency sees these as landing outside its area of concern. This was a welcome sign for many. However, there was a subtle warning for Tether in the agency’s statement.
The regulator, now run by crypto-friendly leaders since the election of President Trump, dismissed stablecoins as well outside its securities jurisdiction. But it indicated in a footnote that appropriate stablecoin reserves “do not include precious metals or other crypto assets.” Both of these are part of Tether’s reserves. The GENIUS Act explicitly states that “payment stablecoins are not securities or commodities.” It also says permitted payment stablecoin issuers are not investment companies. But this is not law, yet.
Such considerations are technically outside Tether’s immediate concern in its current business model. That model deliberately stays away from direct contact with U.S. customers. For now, at least. The coming months will show if this strategy holds, or if the winds of regulation push Tether into a new direction entirely.
