Once signed into law, the Genius Act gives to Stablecoin publishers of 18-36 months to comply with that provision. If they fail, they will be prohibited from operating within the US market. Tether, the publisher of the world’s largest Stablecoin USDT, is making a difficult decision.
Known for its lack of transparency and failing to publish periodic audits, Tether has three options to choose from: It can adhere to the requirements of the genius law for thorough transparency, and adhere to another stubcoin that suppresses dangerous practices, withdraw from or launch from the US market.
The new era of Stablecoins
Genius aims to bridge US cryptocurrency and traditional finances by providing essential regulatory safeguards to the stable. These are the most unstable digital assets offered by Crypto, and are the most attractive to risk aversion individuals.
Passing the bill marked a strong victory for an industry that most people once considered a Ponzi scheme, but not everyone is set to win under that guidelines.
Tether’s USDT, which controls more than 60% of the world’s Stablecoin Supply, could be one of the losers, as the Act introduces unprecedented demands for transparency and surveillance.
The bill, already passed by the Senators and now moved to the House for final formation, determines the exact timeline of compliance for Stablecoin publishers. The Senate version suggests three years and the home is 18 months.
Transparency record with tether problems
Before the genius act was passed, Tether faced important and long-standing criticism of its transparency and adherence to strict audit standards.
For years, Stablecoin issuers have consistently refused to undergo comprehensive and independent audits by major accounting firms. Concerns about how Tether supported the preparation ultimately led to important legal action from the US justice system.
In 2021, Tether was forced to settle an investigation with the New York Attorney General. The Attorney General had alleged that Tether and its associated exchange, Bitfinex, issued a false statement about backing up USDT Stablecoin.
The central element of the study centers on losing access to approximately $850 million in customer funds in customer and corporate funds held by third-party payment processors. Bitfinex is said to have borrowed heavily from Tether’s reserves to address this deficit and to encourage customer withdrawals.
As a result, Tether’s USDT was not fully supported by Fiat currency, as it publicly claimed. The settlement required the companies to pay a civil penalty of $18.5 million and banned the operation or service of New York customers.
Since then, Tether has begun releasing quarterly proofs on its preparation. However, these are still insufficient under the provisions of the Genius Act.
Beyond audits, publishers must strictly adhere to requirements that curb risky practices related to the use of Stablecoin.
Reduces illegal use
Historically, malicious actors have misused stubcoins to avoid sanctions and to espionage worldwide.
As the world’s largest stubcoin issuer, Tether faces scrutiny after evidence emerged that enemies like Russia and North Korea are using USDT to avoid US sanctions.
In recent years, Tether has increasingly argued about his commitment to combat illegal activities and publicly argued that he would work with law enforcement.
According to the publisher, Tether has a strict wallet exclusion policy, which uses to comply with the demands of numerous law enforcement agencies to freeze the stupidity linked to illegal activities.
In March, Tether supported the US Secret Service by freezing $23 million linked to licensed exchanges and worked with the Department of Justice and the Federal Bureau of Investigation on other cases.
These developments are positive for Tether, but the publisher must strictly adhere to the new legal requirements. The Genius Act expressly requires that all Stablecoin issuers, including foreign companies, have the technical ability to freeze and seize the Satanya and comply with legitimate orders from the authorities.
Additionally, they need to regularly implement a money laundering anti-money laundering (AML) program and know the customer (KYC) steps.
Tethers will need to determine whether they will comply with these new measures or whether a full withdrawal from the US market is a more favorable strategy. There are many factors to consider.
Can USDT thrive without the US market?
Tethers dominate the stubcoin market with a large margin. According to Coingecko, the issuer currently has a total supply of nearly 158 billion. Circle’s USDC came in second place, far behind in its 62 billion supply.
The US is an important Stablecoin market, but it is not Tether’s main focus. The publisher’s most important businesses come from operations in Asia, Latin America and other emerging markets.
In fact, most of Tether’s silly, silly trading volume, which surpassed $62 billion yesterday alone, occurs on platforms outside the US, particularly Binance. In that sense, withdrawing from the US market may not be a major blow to Tether.
Beincrypto did not receive an immediate response when contacted Tether for comments. However, the publisher’s possible course of action can be inferred by observing how they acted in similar situations.
When the European Union implemented the market under Crypto Assets (MICA) regulations, tethers were drawn from the market. MICA has begun to demand strict licensing and regulatory approvals for Stablecoin issuers, strict preliminary requirements, and increased audits for maximum transparency.
Tether’s core business thrives outside the US, but the very important thing in the US market means that being drawn out for the issuer can still be extremely damaging.
High stakes for withdrawal
The US is a key market for financial innovation and liquidity. Withdrawal means losing direct access to a vast user base, institutional investors and significant global trading volume.
Also, withdrawal will send the wrong message to investors, users and traditional financial players. Tethers will meet solid regulatory standards and fail to erode trust, or will inherently acknowledge and acknowledge its reputation.
Meanwhile, Circle’s USDC offers great advantages. As a fully compliant Stablecoin working actively to meet EU regulations with us, Circle could attract users and potentially attract market share from tethers.
However, the circle’s second place position is far behind Tether’s position, indicating that compliance alone is not enough to overtake market leaders.
In fact, Tether’s substantial market domination could be forced to provide concessions that encourage American lawmakers to continue their operations in the United States.
Is there still room for compromise?
The Senate has already passed the Genius Act, but the legislation is facing potential changes as it moves to the House. Members of both rooms must harmonize the provisions of the Genius Act with the House version known as stable conduct.
This coordination process provides opportunities for revision, including a critical compliance timeline for Stablecoin publishers.
Beyond this period, other notable differences between the two bills, such as restrictions on public institutions that issue stable entities and specific requirements for foreign issuers, are also subject to negotiation and potential concessions.
An anonymous source close to the legislative process of the Genius Act suggested that US lawmakers and Tethers would likely seek the centre.
This trend can be attributed to the understanding that stubcoin needs to hold large reserves in financial assets, as it requires large reserves on dollar aid assets such as Treasury bills, and could indirectly support the value of the dollar, particularly with current concerns about its stability.
The expected boom in Stablecoin demand after the passing of the Genius Act makes this aspect important.
“There was mutual recognition from the US government and Tether. They’re a bit stuck with each other… The demand for Treasury (tether) is greater than in Germany. That’s the best interest in the US, and we don’t force them to pull everything out by overly strict regulations.
But there’s a third option that Tether says he’s already considering.
Will Tether fire another stub coin for the US?
Tether CEO Paolo Ardoino announced earlier this year that he plans to introduce US-based Stablecoin soon this year. This offer features distinct characteristics with USDT and is specifically tailored to national needs.
He added that USDT works primarily to serve fewer banks around the world, but another stubcoin compliant with genius will work more effectively in the US market.
However, this may not be a choice that falls into Tether’s biggest interest.
“Functionally, you probably don’t need to do that. It just creates more overhead and introduces administrative and non-compliant inefficiencies. Compared to tracking what they’re in and out of Geolocations, they don’t need to track firewall users,” the same source said on the topic.
Ultimately, Tether’s advancement is full of important choices. With the Genius Act setting new benchmarks for transparency and risk management, the world’s largest Stablecoin publisher must weigh the benefits of US market access against the cost of compliance.
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