• JPMorgan analysts suggest Tether may need to sell non-compliant assets, including Bitcoin and corporate debt, to meet proposed U.S. stablecoin regulations.
  • Two U.S. bills, the STABLE Act and GENIUS Act, propose stricter reserve requirements, potentially impacting Tether’s market dominance in the country.

According to a report by JPMorgan analysts, Tether may need to sell certain reserve assets, including Bitcoin, precious metals, corporate debt, and secured loans, to comply with new stablecoin regulations proposed in the U.S.

The U.S. Congress is currently reviewing two bills aimed at regulating stablecoin issuers—the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act in the House and the Guiding and Establishing National Innovation for the U.S.

Stablecoins (GENIUS) Act in the Senate. Both bills propose licensing requirements, risk management rules, and a mandate for stablecoins to maintain 1:1 reserve backing with highly liquid assets.

JPMorgan analysts, led by Nikolaos Panigirtzoglou, noted that under the STABLE Act, only 66% of Tether’s reserves would be considered compliant, while the GENIUS Act’s standards would allow 83% of its holdings. These figures reflect a decline in compliance compared to mid-2024, largely due to the increasing supply of stablecoins, the report stated.

The STABLE Act seeks to enforce stricter reserve requirements and allow regulation at the state level, whereas the GENIUS Act proposes federal oversight for large issuers and a broader range of acceptable reserve assets. If either bill is enacted, analysts believe Tether would need to shift more of its holdings into U.S. Treasuries and other highly liquid assets to meet compliance standards.

Tether, which holds nearly 60% of the global stablecoin market, has already faced regulatory pressure in Europe. Under the Markets in Crypto-Assets (MiCA) regulations, large stablecoin issuers must hold 60% of their reserves in European Union banks. This led to Tether being delisted from several European exchanges, though its smaller market share in the region minimized the impact, according to analysts.

However, the U.S. market presents a greater challenge for the company. The proposed legislation would require issuers to maintain more transparent reserves with frequent audits, potentially putting pressure on Tether’s dominance in the U.S. stablecoin sector.

"U.S. stablecoin regulations requiring more transparency and frequent reserve audits pose additional challenges to Tether," the analysts stated.

Both bills are expected to be reviewed further in 2025, with potential enactment later this year.

Edited by Harshajit Sarmah