The GENIUS Act, if passed, could potentially benefit Tether by providing the stablecoin issuer with the option to operate under relatively lenient conditions. According to Galaxy head of research Alex Thorn, the bill would create a pathway for Tether to register in the US, but would not mandate it to do so in order to continue its operations.
Under the current language of the bill, non-registered stablecoin issuers like Tether would face limited restrictions if they choose not to register. These restrictions include prohibitions on interbank settlements and marketing their tokens as “stablecoins” within the US. While the interbank settlement restriction may not currently impact Tether significantly, it could affect its future adoption in institutional finance. The prohibition on marketing USDT as a stablecoin within the US market, introduced as an amendment during a recent Senate Banking Committee session, would not prevent Tether from being traded onshore.
The GENIUS Act outlines a regulatory framework for stablecoins, requiring issuers to maintain 1:1 reserves in US dollars, insured bank deposits, or short-term Treasury bills. The bill, which received bipartisan support from the Senate Banking Committee on March 13, is now set for a full Senate vote.
For Tether, the bill offers clear registration pathways in the US, potentially through the Office of the Comptroller of the Currency (OCC). If Tether chooses to register, it could do so either fully or through a subsidiary that issues a compliant version of USDT. However, if Tether opts not to register, it can still operate in the US by adhering to compliance requirements set by the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN).
Thorn noted that the bill provides clarity on anti-money laundering protections, with the US Treasury designating a non-compliant foreign issuer only if it fails to comply with lawful orders to freeze or seize assets. Tether’s track record of complying with such orders, including freezing over 2,150 addresses to date, suggests it would not immediately be classified as non-compliant under the GENIUS Act.
Furthermore, new amendments to the bill introduce additional restrictions on offshore, non-registered stablecoins. These stablecoins would not be considered cash equivalents for accounting purposes and would not be eligible for margin or cash equivalency treatment by financial institutions like broker-dealers, swap dealers, futures commission merchants (FCMs), or derivatives clearing organizations (DCOs). While these measures may limit the financial and institutional use of unregistered stablecoins, they would not eliminate their presence or trading within the US market.
Overall, the GENIUS Act presents opportunities for Tether to navigate regulatory requirements in the US, potentially benefiting from more flexible operating conditions while ensuring compliance with anti-money laundering regulations.