A version of this story appeared in The Guidance newsletter on July 28. Sign up here.

Tether Poised for US Debut with Institutional-Focused Stablecoin

In the lead-up to the passage of the Genius Act, major banks like Bank of America and Citigroup dominated the narrative around the future of stablecoins. However, established issuer Tether was always expected to be the game-changer for dollar-pegged cryptocurrencies in the US, despite its conspicuous absence from the world’s largest economy.

That status quo appears set to change. Recent reports indicate Tether is planning a US launch, potentially by year-end.

Wholesale Focus

According to Bloomberg News, Tether intends to launch a new dollar-backed stablecoin in the US, distinct from its existing USDT. CEO Paolo Ardoino confirmed the company’s strategy to pivot towards institutional payments and interbank settlements.

This wholesale approach represents a significant departure. By focusing on transactions outside the retail market, Tether aspires to integrate directly into the US financial system’s core.

Given USDT’s dominance, accounting for 61% of the $266 billion global stablecoin market capitalization, financial institutions are likely viewing Tether’s planned entry with considerable interest.

Success, however, hangs on Tether’s ability to meet the stringent requirements outlined in the Genius Act.

Compliance Challenges

Tether has historically demonstrated little appetite for such requirements. Most notably, the company chose to cease operations in Europe shortly after the implementation of the EU’s Markets in Cryptoassets Regulation (MiCA) in 2023.

The company currently relies on methods called “attestations” for reserve disclosure, a practice lacking the rigor of formal, regulated audits demanded of public companies.

Financial institutions Tether targets for its new US stablecoin are expected to view these disclosure practices favorably only if they meet higher regulatory standards.

The Genius Act, by providing a unified regulatory pathway, potentially addresses this concern. Furthermore, connections within the administration, including former Commerce Secretary Howard Lutrick’s firm being a Tether partner, may prove beneficial.

This effort comes amidst evolving competition. Circle, led by Jeremy Allaire in New York, has already navigated MiCA and US regulations without waiting for the Genius Act. This established compliant position naturally puts Tether at a competitive disadvantage in its home market of institutional finance.

Traditionally reluctant to embrace stringent regulations and now contending with a well-positioned competitor, Tether faces a significant uphill battle in establishing its role in the heartland of global finance.