Alex Thorn, who leads research at Galaxy, suggests that the GENIUS Act may benefit Tether by permitting it to function under relatively lenient conditions.
Thorn evaluated that this legislation would create an opportunity for Tether to register in the US but wouldn’t necessitate registration for it to continue its operations.
Minimal restrictions for offshore issuers
According to the current text of the bill, Tether would not be breaking any laws even if it opts out of registration under the new structure.
As it stands, the main limitations on unregistered stablecoin issuers like Tether would involve prohibitions on interbank settlements and restrictions on marketing their tokens as “stablecoins” in the US.
Thorn noted that while the first limitation is not a pressing concern for Tether at the moment, it could affect its future acceptance in institutional finance.
The second limitation, which was reportedly added as an amendment during a recent Senate Banking Committee meeting, would restrict Tether from promoting USDT as a stablecoin within the US, although it would still be able to trade onshore.
The GENIUS Act suggests a regulatory framework for stablecoins, outlining the rules for issuance and oversight. This regulation includes a 1:1 reserve requirement that consists of US dollars, insured bank deposits, or short-term Treasury bills.
The Senate Banking Committee passed the bill on March 13, receiving bipartisan support. It is now ready for a full Senate vote.
Paths to Registration
The GENIUS Act seems to provide Tether with a straightforward path to register as a stablecoin issuer in the US, likely through the Office of the Comptroller of the Currency (OCC). Should it decide to take this route, Tether could either fully register USDT or establish a subsidiary that issues a compliant version of the token.
Nevertheless, if Tether opts not to register, it may still continue operations in the US as long as it adheres to the compliance guidelines set by the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), which it is already doing.
Thorn added that the bill provides crucial clarifications on anti-money laundering protections. The US Treasury will only designate a foreign, non-registered issuer as non-compliant if it fails to follow lawful directives to freeze or seize assets.
This designation for non-compliance would not apply to all non-registered stablecoin issuers. Tether has a track record of adhering to such orders, having frozen at least 2,150 addresses to date. This indicates it’s unlikely to face immediate risks of being labeled non-compliant under the GENIUS Act.
Additional Limitations
The analyst also pointed out new amendments to the bill that introduce further restrictions on offshore, non-registered stablecoins.
Specifically, stablecoins issued by entities not registered under the framework will not be regarded as cash equivalents for accounting purposes.
They will also be ineligible for margin or cash equivalency treatment by broker-dealers, swap dealers, futures commission merchants (FCMs), or derivatives clearing organizations (DCOs).
Thorn reiterated that while these measures might limit the financial and institutional use of unregistered stablecoins, they would not eliminate their availability or obstruct trading within the US market.
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