Galaxy’s head of research, Alex Thorn, suggests that the GENIUS Act could be advantageous for Tether by allowing it to operate under relatively flexible conditions. Thorn assessed that the bill would pave the way for Tether to register onshore, though it would not be mandatory for its continued operation.
**Limited Restrictions for Offshore Issuers**
According to the bill’s current text, if Tether decides not to register under the new framework, it wouldn’t be breaking any laws. The major restrictions for non-registered stablecoin issuers like Tether would involve prohibiting interbank settlements and marketing their tokens as “stablecoins” within the U.S. Thorn mentioned that the first restriction is not a significant issue currently but could impact future adoption in institutional finance. The second restriction would prevent Tether from advertising USDT as a stablecoin in the U.S. market, but it would still allow onshore trading.
The GENIUS Act aims to create a regulatory framework for stablecoins, outlining rules for issuance and oversight, including a 1:1 reserves requirement of U.S. dollars, insured bank deposits, or short-term Treasury bills. The Senate Banking Committee approved the bill on March 13 with bipartisan support, and it is now ready for a full Senate vote.
**Registration Pathways**
The GENIUS Act provides a clear option for Tether to register as a stablecoin issuer in the U.S., likely through the Office of the Comptroller of the Currency (OCC). If Tether chooses this route, it can either register USDT fully or create a subsidiary that issues a compliant version of the token. However, Tether can continue operating in the U.S. if it adheres to compliance requirements set by the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), which it currently follows.
Thorn noted that the bill clarifies anti-money laundering protections, stating that a foreign, non-registered issuer will only be deemed non-compliant if it disobeys lawful orders to freeze or seize assets. This designation would not automatically apply to all non-registered stablecoin issuers. Tether has a track record of compliance, having frozen at least 2,150 addresses, suggesting it is at low risk of non-compliance under the Act.
**Additional Restrictions**
The analyst also pointed out new amendments to the bill that impose further restrictions on offshore, non-registered stablecoins. Specifically, stablecoins from unregistered entities will not be treated as cash equivalents for accounting purposes and will not qualify for margin or cash equivalency treatment by broker-dealers, swap dealers, futures commission merchants (FCMs), or derivatives clearing organizations (DCOs). Thorn emphasized that while these measures would limit the financial and institutional use of unregistered stablecoins, they would not eliminate them or prevent trading within the U.S. market.
Stay updated on this topic by following us on Twitter.
