Tether could be forced to liquidate its Bitcoin holdings to meet new US planned stablecoin rules, according to JPMorgan analysts. Tether hotly denies it, labeling the allegations as baseless and misleading.
Proposed US Stablecoin Regulations
Two of the most prominent bills propose stablecoin regulation. The GENIUS Act, proposed on February 4, would create a federal licensing scheme for stablecoin issuers. The STABLE Act, proposed on February 6, would impose more stringent reserve requirements, with stablecoin issuers being able to hold only insured deposits, US Treasury bills, short-term Treasury repos, and central bank reserves.
How Would This Affect Tether?
Tether has reserves of Bitcoin and others that don’t completely overlap with these laws. Just 66% of the reserves held by Tether would be qualified under the STABLE Act, and 83% would qualify under the GENIUS Act. If these bills are enacted, Tether will have to shift its reserves, possibly selling out some of the Bitcoin in order to meet regulatory requirements.
Tether’s Reaction
https://twitter.com/bitfinex/status/1890023125259321528
Tether dismissed JPMorgan’s claims, insisting that the law is not final and will be open to industry consultation. It emphasized its $20 billion of equity and $1.2 billion of quarterly profits from US Treasurys, adding that it remains financially healthy. A Tether spokesperson also indicated that JPMorgan analysts are upset at missing a chance to purchase Bitcoin at lower prices.
What This Means for Crypto
Forced restructuring of issuers’ reserves by stablecoin issuers would increase the transparency and regulatory stability of the market. Additionally, a forced sell-off of Bitcoin by Tether would lead to price volatility in the short term.
Analysts at JPMorgan predict Tether may be compelled to liquidate Bitcoin as a result of new regulations on stablecoins, but the firm asserts no such urgency. As the bills move forward, the cryptosphere is waiting to see how regulations will affect stablecoins and Bitcoin.
