The GENIUS Act, a proposed bill focused on regulating stablecoins, has garnered attention from Galaxy head of research Alex Thorn. Thorn believes that the Act could potentially benefit Tether, a prominent stablecoin issuer, by offering it more flexibility in its operations. The bill would provide Tether with the option to register in the US under certain conditions, although it would not be mandatory for the company to do so in order to continue its activities.
One of the key aspects of the GENIUS Act is the limited restrictions it imposes on offshore stablecoin issuers like Tether who choose not to register under the new regulatory framework. These restrictions include prohibitions on interbank settlement and marketing their tokens as “stablecoins” within the US. While the first restriction may not pose a significant issue for Tether currently, it could potentially affect its future adoption in institutional finance. The second restriction, introduced as an amendment during a Senate Banking Committee session, would prevent Tether from explicitly advertising USDT as a stablecoin within the US market, but would not prohibit its onshore trading.
The GENIUS Act outlines a regulatory framework for stablecoins, specifying rules for issuance and oversight. Notably, the bill includes a 1:1 reserves requirement for stablecoin issuers, which must consist of US dollars, insured bank deposits, or short-term Treasury bills. Following approval by the Senate Banking Committee in March with bipartisan support, the bill is now set for a full Senate vote.
In terms of registration pathways under the GENIUS Act, Tether has the option to register as a stablecoin issuer in the US, potentially through the Office of the Comptroller of the Currency (OCC). If Tether decides to pursue this route, it could either fully register USDT or create a subsidiary issuing a compliant version of the token. Alternatively, Tether could opt not to register and continue operating in the US by adhering to compliance requirements set by agencies such as the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), a practice they already follow.
Additionally, the bill provides clarity on anti-money laundering protections, stating that the US Treasury would only designate a non-compliant foreign stablecoin issuer if it fails to comply with lawful orders to freeze or seize assets. Tether’s track record of complying with such orders, including freezing over 2,150 addresses to date, suggests that it would not immediately face non-compliance under the GENIUS Act. Amendments to the bill introduce further limitations on unregistered offshore stablecoins, such as exclusion from cash equivalency treatment in accounting and limitations on financial use by specific entities.
In summary, the GENIUS Act presents potential opportunities and challenges for stablecoin issuers like Tether, offering a regulatory framework that aims to balance oversight with operational flexibility. As the bill progresses towards a Senate vote, stakeholders in the cryptocurrency space will be closely monitoring its implications for the industry and individual projects like Tether.
