GENIUS Stablecoin Bill To Put Tether’s USDT in the Hot Seat—Comply or Flee

• Stablecoins with a market cap above $10 billion fall under Federal scrutiny.
• USDT and USDC are the only stablecoins exceeding the $10 billion threshold.
• In 2024, Tether pulled $13 billion in net profits.

Stablecoin issuer Tether (USDT) may struggle to keep a footing in Western markets as a comprehensive piece of legislation covering stablecoins is introduced into the U.S. government.

GENIUS Stablecoin Act

On Feb. 4, 2025, Tenessee Republican Senator Bill Hagerty introduced  the “Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act,” a sweeping regulatory framework for stablecoin payments and settlements.

Under the legislation, U.S. dollar-denominated stablecoins are required to be backed with U.S. dollars, Treasury bills, Federal Reserve notes, and other assets.

Stablecoins with market caps above $10 billion will fall under Federal Reserve regulations; those under $10 billion come under the purview of state regulations.

Interestingly, the bill contains provisions that would allow stablecoins above the $10 billion threshold to follow a waiver process to remain under state regulations.

Presently, only Tether (USDT) and USD Coin (USDC) qualify to fall under federal scrutiny.

Furthermore, it requires stablecoin issuers to submit audited reports on reserves every month and will impose criminal penalties for false reporting.

Insiders have told reporters  that the bipartisan framework, co-sponsored by senators Cynthia Lummis, Tim Scott, and Kirsten Gillibrand, is expected to pass through Congress smoothly.

Trouble Brewing

Often considered “too big to fail” simply due to the sheer liquidity USDT provides to the crypto markets. In 2024,  the long-standing stablecoin issuer profited $13 billion  in net profits.

This bill could spell bad news for crypto’s long-dominant stablecoin, USDT, which has a tricky relationship with regulators and audits.

Bearing an enormous $140 billion  market cap, the stablecoin has been considered a ticking time bomb within the crypto markets due to its inability to provide independent third-party audits.

In its early years, Tether claimed USDT was backed 1:1 by cold hard cash. However, over time, it has built out an extensive reserve of cash, cash equivalents, and “other short-term deposits” to ensure it has backing to keep the token pegged to $1.

Sure, Tether has provided proof of reserve audits or attestations.

However, the so-called “audits” come from Tether’s chosen auditing partner, third-party accounting firm BDO Italia.

None of the Big Four accounting firms, let alone the top 100, refuse to get anywhere near it. Tether CEO Paolo Ardoino claims they cite “reputational risk” as their reasoning.

In fact, the need to comply with audits and proof of reserve requirements is the reason why Tether was forced out of European markets.

When the EU’s Markets in Crypto-Assets (MiCA) regulations came into force last December, Tether was unable to meet or didn’t want to comply with the regulatory standards and acquire an e-money license to operate.

This resulted in USDT being de-listed from several major EU platforms and exchanges and a brief dip in its market cap.

Now, it has little choice but to comply with U.S. regulations or give up its market share to Circle’s USDC and move to deregulated markets such as El Salvador, where it has already established a favorable market position.