JPMorgan: Tether May Have to Sell Bitcoin to Comply with New US Stablecoin Regulations
Legal Challenges to Tether in the US
According to a JPMorgan analysis led by Nikolaos Panigirtzoglou, Tether (USDT) may have to sell some of its non-compliant assets - including Bitcoin, precious metals, commercial paper, and secured loans - to comply with new US stablecoin regulations.
Two stablecoin bills are currently being considered in the US Congress:
- STABLE Act (Stablecoin Transparency and Accountability Act) in the House: Introduced by French Hill with Rep. Bryan Steill, it would enforce stricter reserve requirements and allow for state-level regulation.
- GENIUS (National Stablecoin Innovation and Guidance Establishment) Act in the Senate: Introduced by Senator Bill Hagerty, requires federal oversight of major issuers and allows for multiple types of reserve assets.
Both bills require stablecoin issuers to have operating licenses, rigorous risk management, and 1:1 reserve guarantees.
The JPMorgan report found that only 66% of Tether’s reserves meet the STABLE Act standards, while 83% meet the GENIUS Act. Notably, both figures show a gradual decline in compliance since mid-2024 as stablecoin supply skyrockets, analysts said.
In its Q4 2024 financial report reporting a profit of $13 billion, Tether said it was holding $7.8 billion worth of Bitcoin, equivalent to 83,758 BTC at the time of $93,812 / BTC, and this is one of the assets that may not be accepted if the new regulations come into effect.
If either bill is passed, Tether may have to restructure its reserves, increasing its holdings of US Treasury bonds and more liquid assets.
Data from CoinGecko shows that Tether's USDT currently has a market capitalization of $141.9 million, equivalent to controlling nearly 60% of the current global stablecoin market share of $233 million.
Tether CEO 'Fires Back' at JPMorgan, Claims Reserves Are Strong
In response to the JPMorgan report, Tether CEO Paolo Ardoino has responded strongly to the company's reserves and potential legal challenges.
Although the Tether CEO did not respond to the possibility that Tether would sell Bitcoin to comply, he posted on his X with the content: "Tether analysts say JPMorgan does not have enough Bitcoin." - implying that JPMorgan is jealous of Tether for not buying Bitcoin cheaply in the past.
Currently, Tether is subject to strict supervision in Europe under the MiCA regulation, which requires major stablecoin issuers to keep 60% of their reserves in European Union banks. This has put USDT at risk of being delisted from several European exchanges, including Coinbase, but given Tether's small market share in the region, the impact is not too big.
However, the US market is a much bigger challenge for Tether. With higher transparency requirements and regular reserve audits, Tether's dominance in the US could be affected.
JPMorgan believes that US stablecoin regulations will be issued later this year, putting more pressure on Tether to adjust its reserve portfolio. In particular, the plan to expand operations in the US is seen as a solution to legitimize the regulations here.
This information once again pushes investors' sentiment into a "fearful" position about the prospect of a new sell-off, since the US/German government dumped a large amount of Bitcoin in the summer of 2024.
