The recent analysis by J.P. Morgan suggesting potential compliance risks for Tether in the U.S. if new stablecoin regulations are enacted has been challenged by Paolo Ardoino, the CEO of Tether.
Ardoino dismissed the J.P. Morgan report as being ‘salty,’ emphasizing that Tether holds significant liquidity of over $20 billion, thus capable of meeting the requirements outlined in the proposed bills.
He further mentioned that more information regarding the bills and possible discussions will unfold in the upcoming weeks.
J.P. Morgan Raises Concerns About Tether’s Reserves
The assessment from J.P. Morgan indicates that only 66% to 83% of Tether’s reserve assets comply with the GENIUS Act and STABLE Act, two bills concerning stablecoins introduced by U.S. policymakers. A segment of the J.P. Morgan analysis cited by The Block stated:
“Tether’s reserves align with 66% of the requirements under the STABLE Act proposed in the House, while 83% meet the criteria of the GENIUS Act in the Senate.”
Observers point out that the STABLE Act enforces rigorous reserve standards for potential stablecoin issuers at the state level, whereas the GENIUS Act opts for a more flexible approach with a varied reserve scope under federal oversight.
Nonetheless, data from analysts suggests a decrease in compliance percentages compared to the previous quarter, presenting a challenge for Tether.
Several cryptocurrency exchanges in the European Union have pulled Tether’s USDT, allowing Circle’s USDC to gain more traction in the market.
Despite this, the market dominance of USDT in the U.S. and other regions has prevented any significant impact on its overall market size.
Moreover, USDT’s market capitalization recently reached a record high of $141 billion.
However, analysts indicate that Tether might need to offload some of its non-compliant reserve assets to meet the regulatory thresholds outlined in the two proposed stablecoin bills.
The report also suggests that this action would affect Bitcoin, precious metals, and collateralized loans. Presently, Tether holds 83.7K BTC, valued at over $8 billion.
Despite concerns, some market experts, including Alex Kruger, warn that failure by Tether to adhere to U.S. stablecoin regulations could have negative implications for the broader market. Responding to the J.P. Morgan report, Kruger commented:
“This seems reasonable – an area to monitor closely as it could have bearish implications.”
The fate of the two bills is expected to be decided later this year, and it remains to be seen how Tether will adapt to ensure compliance.