JPMorgan says Tether may need to sell Bitcoin to comply with US stablecoin regulations

The US has introduced two stablecoin bills to regulate stablecoin issuers. According to JPMorgan analysts, for Tether to follow the planned US stablecoin rules, it might have to sell assets that don’t follow the rules. These could include Bitcoin, precious metals, corporate paper, and secured loans.

The two bills are Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE Act) in the House and Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS Act ) in the Senate. 

The bills require them to get licenses, set rules for risk management, and provide 1:1 reserve backing. The GENIUS Act requires federal oversight of large issuers and allows the use of a wider range of reserve assets. 

On the other hand, the STABLE Act sets stricter reserve standards and lets states regulate. Analysts said that Tether would have to change its funds by putting more money into US Treasuries and other liquid assets if either bill passes.

Tether is in trouble because only 66% of its reserves meet the requirements of the House’s STABLE Act, and 83% meet the requirements of the Senate’s GENIUS Act. This shows that the compliance ratio has been going down since the middle of 2024 when the stock of stablecoins increased.

The proposed US stablecoin regulations are expected to be enacted later this year.

How much impact do the bills have on USDT?

The company’s 2024 Q4 review showed that the period was one of its all-time best, with net profits of more than $13 billion for the year. Group equity jumped over $20 billion, showing that the company is still in dominance.

Luckily for them, in Q4, Tether increased exposure to the US Treasuries, which reached $113 billion. This is almost 80% of the total reserves backing USDT. This was another all-time high. It made Tether one of the biggest buyers of US Treasuries in the world. 

Tether's Q4 2024 reserves attestation is out.@Tether_to continues to invest almost 80% of USDT reserves in US treasury bills.

And to reduce the risk from other assets, Tether holds an extra $7B of equity buffer. That's enough to redeem nearly 5% of USDT supply. pic.twitter.com/VIWig3yrXb

— Bluechip (@bluechip_org) February 10, 2025

Tether also took into account the performance of its gold and Bitcoin holdings, which made about $5 billion in unrealized profits over the course of the year. This is a significant amount that Tether stands to lose because of the bill. 

Paolo Ardoino, CEO of Tether, said, “Tether’s Q4 2024 attestation reinforces our position as a global leader in financial transparency, liquidity, and innovation. With U.S. Treasury holdings surpassing $113 billion, a reserve buffer exceeding $7 billion, and $45 billion in new token issuance for the year.” 

However, JPMorgan’s report said that Tether’s market dominance comes with risks. Now, the company’s lack of regulatory compliance and transparency could be bad for the whole crypto market. 

Tether cannot afford to have problems in the US

According to the analysts, Tether faces a much bigger regulatory battle in the US market because the company has a bigger share of that market. The stablecoin issuer’s strong situation in the US could be threatened by the proposed bills that call for high-quality and liquid assets to be kept as reserves.

They said, “U.S. stablecoin regulations requiring more transparency and frequent reserve audits pose additional challenges to Tether.”

In retrospect, the US is not the only one that has caused the company’s challenges. Tether has struggled in Europe. The Markets in Crypto-Assets (MiCA) rules say that large fiat-pegged token issuers must keep 60% of their reserves in banks in the European Union. This caused USDT to be taken off of a number of European exchanges.

Analysts say that its small market share in the area made the effect less severe. Tether still controls nearly 60% of the stablecoin market.

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