JPMorgan Warns Tether May Sell Bitcoin Amid US Stablecoin Regulations

Tether, the most important stablecoin issuer, is perhaps compelled to promote a few of its Bitcoin holdings to comply with new US laws, says JPMorgan analysts. The US has proposed two legal guidelines, the STABLE Act and the GENIUS Act to set stricter guidelines for stablecoin issuers. These legal guidelines would require stablecoins to have reserves absolutely backed by liquid property like US Treasuries.

Regulatory Strain Mounts on Tether

JPMorgan’s newest report highlights considerations over Tether’s compliance with these new payments. The STABLE Act permits state-level oversight and enforces stricter reserve guidelines, whereas the GENIUS Act mandates federal oversight for giant issuers however affords extra flexibility in reserve property. 

Below the Home’s STABLE Act, solely 66% of Tether’s reserves meet the compliance standards, whereas the Senate’s GENIUS Act units a barely increased bar at 83%.

This declining compliance ratio means that Tether’s capacity to fulfill these necessities has weakened since mid-2024 as a result of fast growth of stablecoin provide. 

If both invoice turns into regulation, the report notes that Tether would wish to restructure its reserves, shifting in the direction of extra liquid property corresponding to U.S. Treasuries.

US Market Poses a Better Problem

Tether has already confronted regulatory hurdles in Europe, the place the Markets in Crypto-Belongings (MiCA) guidelines require giant issuers to carry 60% of reserves in EU-based banks. 

Whereas this led to delistings on a number of European exchanges, the affect was softened by Tether’s restricted market share within the area. Nevertheless, the U.S. presents a extra vital problem on account of Tether’s dominant place within the American market.

With U.S. lawmakers pushing for extra transparency and frequent reserve audits, Tether might face elevated scrutiny. The demand for high-quality and liquid reserves might put strain on its dominant market presence.

Will Tether Promote Bitcoin?

Tether at present holds around 83,758 Bitcoin valued at over $8 billion as a part of its reserves, in keeping with Bitbo. In 2023, Tether introduced plans to allocate 15% of its quarterly earnings to Bitcoin purchases.

Regardless of its strong monetary standing, with a reported $13 billion in earnings for 2024 and a reserve buffer exceeding $7 billion, regulatory adjustments might power the corporate to liquidate a portion of its Bitcoin holdings. 

If U.S. laws demand better liquidity in its reserves, Tether might haven’t any selection however to regulate its asset allocation, probably impacting the broader crypto market.