The GENIUS ACT bill, aimed at regulating stablecoins in the United States, has passed the Senate and is now awaiting action in the House of Representatives. This legislation could lead to significant changes in the operational framework of major stablecoins like Tether.
What is the GENIUS ACT?
The GENIUS ACT requires stablecoins to be backed by safe assets such as cash or short-term government bonds. Large stablecoin companies will also need to publish yearly audited financial statements. This requirement could drastically change the operational rules in the sector.
Challenges for Tether
Tether, the world's largest stablecoin issuer with $156 billion in circulation, is facing challenges under the new requirements. Tether uses bitcoin and gold to back its coins and does not provide full public audits. According to Scott Armstrong, a former federal prosecutor, companies need to meet these new standards to participate in the U.S. market. Without compliance, Tether might be forced to exit the U.S. market.
The Future of Stablecoins in the US
Different versions of the GENIUS ACT propose varying compliance timelines — from 18 months to 3 years. Moreover, companies will also be required to cooperate with law enforcement and freeze assets linked to criminal activity. The future for Tether remains uncertain as the company could consider exiting the U.S. market, similar to its earlier actions in the European Union. Meanwhile, its competitor Circle, which is already adhering to the new rules, is in a more favorable position.
The GENIUS ACT has the potential to reshape the landscape of stablecoins in the U.S., establishing new requirements for companies and creating advantages for those willing to adapt.
