A version of this story appeared in The Guidance newsletter on July 28. Sign up here.
Step aside banks. Here comes Tether.
In the runup to passage of the Genius Act, lenders such as Bank of America and Citigroup sparked a lot of buzz with their plans to develop stablecoins now that a regulatory regime was set.
Yet while the banks will play a key role, Tether was always going to be the force multiplier when it came to dollar-pegged cryptocurrencies in the US. If only it would deign to enter the world’s biggest economy.
Well, now comes word that it is doing just that.
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.
But here’s the twist: CEO Paolo Ardoino said Tether plans to launch a new dollar-backed stablecoin and focus on institutional payments and interbank settlements.
The wholesale strategy is important because it means that Tether aspires to play a key role at the heart of the US financial system.
Given the company’s dominance — USDT accounts for 61% of the $266 billion market capitalisation in stablecoins — you can bet big banks and other institutions will take its offerings seriously.
Still,Tether must comply with the bevy of requirements coming online thanks to the Genius Act.
Stablecoin issuers will not only have to register and be approved by the Office of the Comptroller of the Currency, but they will also have to produce audited financial statements disclosing the reserves supporting their cryptocurrencies.
Tether has shunned playing ball with officialdom. It elected to stay out of the European Union after it ushered in the Markets in Cryptoassets Regulation, or MiCA, in 2023.
Moreover, Tether must find an auditor for its books. At the moment, Tether relies on “attestations” to disclose its reserves, which don’t have the credibility of regulated audits conducted for public companies.
Ardoino told DL News last year he was keen on signing up one of the Big Four accounting firms, but they had balked out of fear having Tether as a client would damage their reputations.
Chances are the august institutions Tether plans to court for its new US stablecoin will frown on such unorthodox practices.
This may change now that the Genius Act establishes a level playing field in the US. Plus, it doesn’t hurt that US Commerce Secretary Howard Lutnick’s former firm was a Tether partner.
The other drama that will unfold is Tether’s rivalry with Circle. Under CEO Jeremy Allaire, New York-based Circle did comply with MiCA and US regulations long before the Genius Act became law.
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