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Why Tether’s US entry poses challenge for Circle and itself
Step aside banks. Here comes Tether.
In the run-up to the passage of the Genius Act, lenders such as Bank of America and Citigroup created a buzz with their plans to develop stablecoins now that a regulatory regime was set.
Yet while the banks are key players, Tether was always expected to be a significant force in the realm of dollar-pegged cryptocurrencies in the US. If only it would enter the world's largest economy.
Well, now there are reports that it is doing just that.
Wholesale strategy
Last week, Bloomberg News reported that the issuer of the USDT stablecoin plans to go live in the US as early as the end of the year.
However, there's a twist: CEO Paolo Ardoino stated Tether plans to launch a new dollar-backed stablecoin and focus on institutional payments and interbank settlements.
The wholesale strategy is noteworthy because it suggests Tether aspires to play a key role within the US financial system.
Given the company’s dominance — USDT accounts for 61% of the $266 billion market capitalization in stablecoins — it's likely that major banks and other institutions will take its offerings seriously.
Still, Tether must comply with a suite of requirements emerging from the Genius Act.
Stablecoin issuers will need to register and be approved by the Office of the Comptroller of the Currency and produce audited financial statements disclosing the reserves supporting their cryptocurrencies.
Finding an auditor
Tether has traditionally avoided regulatory processes. It chose to stay out of the European Union after the introduction of the Markets in Cryptoassets Regulation, or MiCA, in 2023.
Moreover, Tether needs to find an auditor for its financial reports. Currently, Tether relies on “attestations” to disclose its reserves, which don’t have the credibility of regulated audits typically conducted for public companies.
Ardoino previously expressed interest in partnering with one of the Big Four accounting firms, but they had been hesitant, fearing reputational harm from associating with Tether.
Chances are the respected institutions Tether plans to target with its new US stablecoin will view such practices unfavorably.
This situation may evolve now that the Genius Act creates a level playing field in the US. Additionally, it might help that US Commerce Secretary Howard Lutnick’s former firm was in partnership with Tether.
Another significant unfolding drama is Tether’s rivalry with Circle. Under CEO Jeremy Allaire, New York-based Circle complied with MiCA and US regulations even before the Genius Act was enacted.
Circle surges
This strategy proved highly successful on June 5 when Circle executed its IPO. Since then, its shares have surged 522% from the offering price, reminiscent of the dotcom boom of the late 1990s.
It’s no surprise that Tether wants a piece of the action. But achieving its ambition to become an integral part of the US financial system is a challenging endeavor for a company less comfortable with compliance.
Tether’s potential clients may not follow the relaxed regulatory stance of the Trump administration, where the president himself is involved in the industry.
This article has been published in dlnews.com via Yahoo News.
Why Tether’s US entry poses challenge for Circle and itself
Tether must find an auditor and register with regulators to play ball in the US. The USDT issuers aspires to a key role. Circle has a head start.
finance.yahoo.com
