TLDR
- Tether is focusing on expanding its stablecoin services primarily outside the United States.
- US Senate and House are advancing bills to impose stricter regulations on stablecoin issuers.
- Both bills require stablecoins to be fully backed by cash or safe assets like short-term Treasuries.
- Tether’s reserves include some assets that would not comply with proposed US regulations.
- The company plans to issue a new stablecoin that meets regulatory requirements to attract institutions.
Tether, the largest stablecoin issuer, is shifting its primary focus to markets outside the United States. This move comes amid growing legislative efforts to regulate stablecoins more strictly within the US. The company seeks to comply with emerging laws while emphasizing international expansion.
The US Senate recently advanced the Genius Act, a bill targeting stablecoin regulation. Meanwhile, the House Financial Services Committee has approved its stablecoin bill, but full House approval remains pending. Both bills aim to enforce backing stablecoins fully with cash and safe assets, tightening rules for issuers.
Tether, which dominates over 60% of the stablecoin market, has 420 million users mainly in emerging markets. Its substantial presence outside the US contrasts with its limited service to American customers. The company intends to continue leveraging this international market while adapting to evolving US regulations.
Tether Faces Stricter Rules Under New Bills
The Genius Act and the House bill require stablecoin issuers to back tokens with cash or short-term Treasuries. Additionally, issuers must comply with the Bank Secrecy Act and anti-money laundering rules. Both bills include provisions to recognize foreign stablecoin issuers if their regulations meet comparable standards.
Tether’s reserve assets include some compliant holdings and others that would not meet the proposed US rules. These non-compliant assets include Bitcoin and secured loans, which back part of Tether’s stablecoin. Should Tether seek a US license, it would face federal regulation due to its size and market share.
Despite past regulatory challenges, including a 2021 settlement over reserve transparency, Tether is moving toward greater compliance. The company now manages reserves with Cantor Fitzgerald & Co, aiming for stronger financial transparency. To enhance credibility, Tether is also working toward a full audit by a Big Four accounting firm.
Tether’s Strategic Focus on Foreign Markets
Tether maintains that its main growth will continue in international markets, particularly among unbanked populations. The stablecoin addresses payment needs in regions with limited access to traditional banking services. This focus differentiates Tether from potential competitors targeting more developed financial systems.
Tether does not currently serve US customers but remains engaged with US regulators to comply with new rules. The company plans to issue a new stablecoin version aligned with legislative requirements to attract institutional users. This approach reflects a dual strategy of international focus and readiness for possible US market participation.
Major US banks are exploring stablecoin initiatives, but Tether sees these efforts as targeting Western markets. Tether’s leadership believes its primary customer base remains outside these regions, driving its continued emphasis abroad. As US stablecoin laws evolve, Tether’s strategy balances compliance and global expansion.
