JPMorgan: Tether May Sell Bitcoin to Comply with Proposed U.S. Stablecoin Regulations

Tether, the issuer behind the world's largest stablecoin, USDT, may need to sell off non-compliant assets, including Bitcoin, precious metals, corporate paper, and secured loans, to comply with proposed U.S. stablecoin regulations, according to JPMorgan analysts.

Understanding the Proposed Regulations

The U.S. government has introduced two key legislative proposals aimed at regulating stablecoin issuers:

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

These bills seek to implement licensing requirements, risk management protocols, and a 1:1 reserve backing for all issued stablecoins.

Tether's Reserve Compliance Challenges

According to the report by JPMorgan analysts, only 66% of Tether’s reserves comply with the STABLE Act's requirements, while 83% meet the standards set by the GENIUS Act. This reflects a decline in compliance ratiossince mid-2024, coinciding with a surge in stablecoin supply.

Tether currently holds approximately 83,758 Bitcoin, valued at over $8 billion, as part of its reserve assets. In 2023, the company announced plans to allocate up to 15% of its quarterly profits toward Bitcoin purchases.

Financial Growth Amid Regulatory Scrutiny

In its Q4 2024 attestation report, Tether revealed its reserve buffer exceeded $7 billion for the first time and that it had earned $13 billion in profits for the year. Despite this growth, the company now faces potential challenges if these proposed regulations are enacted.

Potential Market Impact

The STABLE Act proposes stricter reserve requirements and introduces state-level regulatory oversight, while the GENIUS Act advocates for federal oversight and a more diverse range of permissible reserve assets.

JPMorgan analysts noted that if these bills become law, Tether may need to restructure its reserves, shifting funds into U.S. Treasuries and other highly liquid assets.

Global Regulatory Challenges

Tether has already faced similar challenges in Europe, where Markets in Crypto-Assets (MiCA) regulations require 60% of reserves to be held within EU-based financial institutions. This policy led to Tether's delisting from several European exchanges, though limited regional market share softened the impact.

The U.S. market, however, presents greater regulatory risks due to Tether’s dominant presence in the region. Analysts warn that the company's leading market position could be undermined by regulatory demands for transparency and frequent reserve audits.