Tether's USDT Faces US Regulatory Headwinds as GENIUS Act Takes Effect

The largest stablecoin issuer in the world, Tether's USDT, is facing increased scrutiny in the US market as the GENIUS Act takes effect. The law requires stablecoin issuers to hold reserves in highly liquid and reliable assets such as cash and U.S. Treasuries.

Tether has not yet announced a full restructuring of USDT's reserves or operating model around the new US law, which could make it difficult for the company to comply with the regulations.

Foreign stablecoin issuers, like Tether, have about 2 years before non-compliant coins are barred from US crypto platforms. However, there is some uncertainty around how long foreign issuers have to comply, with some interpreting the safe harbor as applying until July 18, 2028, while others argue that certain obligations may apply sooner.

The U.S. stablecoin market is dominated by two major players, with Tether's USDT being the global liquidity leader and Circle's USD Coin (USDC) better placed inside the US regulatory perimeter. As the market shifts towards compliant issuers, it remains to be seen how Tether will adapt and whether its role in regulated American trading and institutional settlement will be impacted.