As U.S. lawmakers move closer to establishing comprehensive stablecoin regulations under the GENIUS Act, questions loom over how Tether — the world’s largest stablecoin issuer — will respond to a legal framework it may not currently meet.
Tether’s Position Under Scrutiny
Tether, whose USDT stablecoin represents over $155 billion in circulation globally, may soon face significant regulatory challenges in the United States. The company is unlikely to meet the compliance criteria proposed in the Senate’s Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 — legislation that is advancing toward potential passage and could reshape the digital dollar landscape.
Legal experts suggest Tether could adopt a wait-and-see approach rather than immediately attempting to conform to the proposed U.S. framework. Critics, however, warn the bill includes loopholes that could still allow Tether indirect access to U.S. investors.
The GENIUS Act: A New Regulatory Era
The GENIUS Act, set for a Senate vote on Tuesday, represents the first major federal attempt to regulate stablecoins. If approved, it will move to the House of Representatives, and both chambers must ultimately pass the same version before it can be signed into law by President Donald Trump.
Under the current draft, foreign stablecoin issuers can still access U.S. markets, but only under strict conditions. These include oversight by a foreign regulatory regime deemed “comparable” to U.S. standards, registration with the Office of the Comptroller of the Currency (OCC), and holding U.S.-based reserves sufficient to meet domestic liquidity needs.
Further requirements include:
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Maintaining 1:1 reserves in cash, U.S. Treasuries, or similarly liquid assets.
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Monthly audits by a registered public accounting firm, certified by the CEO and CFO.
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Full compliance with U.S. anti-money laundering regulations.
These measures exceed typical financial reporting standards and would subject stablecoin issuers to a high degree of regulatory accountability.
Tether’s Possible Paths Forward
“I wouldn’t expect Tether to rush into U.S. compliance until the final regulatory framework is clear,” said Steve Gannon, a partner at Davis Wright Tremaine. “Complying would require a significant investment in legal, operational, and technological infrastructure.”
Tether has recently moved its headquarters to El Salvador, a country with a favorable stance toward crypto but minimal regulatory infrastructure. Experts believe the GENIUS Act’s flexibility could allow for bilateral agreements—like one between the U.S. Treasury and El Salvador’s government—potentially granting Tether access through a regulatory workaround.
That scenario has drawn criticism from legislators like Sen. Elizabeth Warren (D-MA), who argues such deals would undermine the bill’s intent.
“It’s hard to imagine El Salvador developing a regulatory regime equivalent to the U.S., yet they could be granted access under the current bill,” said Corey Frayer, director of investor protection at the Consumer Federation of America and former SEC crypto policy adviser.
Despite vocal opposition, many Senate Democrats have aligned with Republicans in support of the bill, citing the urgent need for oversight of the stablecoin sector.
Loopholes and Limitations
While the GENIUS Act is seen as a landmark step toward regulating stablecoins, critics argue it still leaves openings for foreign issuers to operate in the U.S. through decentralized platforms.
Sen. Warren has warned that “the bill massively expands the stablecoin market without addressing fundamental national security risks,” and allows “notorious foreign issuers like Tether” to maintain access to U.S. users.
Tether’s U.S. Strategy and New Stablecoin Plans
In response to the growing regulatory pressure, Tether CEO Paolo Ardoino has hinted the company may not try to push USDT into the U.S. market directly. Instead, it is considering launching a U.S.-based, fully regulated settlement stablecoin—potentially offering compliance while shielding the original USDT from domestic scrutiny.
Tether has already warned users that non-compliance with changing laws could trigger regulatory action that would “adversely affect Tether and its ability to operate.”
Still a Long Road Ahead
While the Senate’s momentum is notable, the bill must still pass through the House, where changes could occur. Regulatory clarity won’t come until the final law is enacted and federal agencies issue detailed rulemaking.
“The future for foreign stablecoin issuers like Tether will depend on two unknowns,” said Richard Rosenthal, a digital assets regulatory principal at Deloitte. “First, the law’s final provisions regarding foreign access, and second, how regulators exercise their discretion.”
Frayer noted it’s unlikely the House will impose additional restrictions on Tether, especially given its ally in the Trump administration, Commerce Secretary Howard Lutnick, who previously oversaw Tether’s U.S. reserves at Cantor Fitzgerald.
Still, the entry of corporate giants like Amazon or Google into the stablecoin space could prompt lawmakers to revisit regulatory priorities.
Circle and USDC Eye Opportunity
Tether’s closest competitor, U.S.-based Circle, is well-positioned to benefit from the GENIUS Act’s framework. With plans to operate fully within the regulated U.S. environment, Circle hopes to capture market share if institutions begin allocating to stablecoins under the new rules.
Earlier this year, the SEC appeared to soften its stance on stablecoins but hinted that reserves composed of metals or crypto assets—both used by Tether—may raise concerns. While the GENIUS Act clarifies that stablecoins are neither securities nor commodities, that provision won’t be binding until it becomes law.
For now, Tether continues to avoid direct U.S. exposure. But as regulation tightens and competitors gear up for a compliance-driven surge, the world’s largest stablecoin may soon have to make a pivotal decision: adapt or stand aside.
