JPMorgan Cautions That Tether Might Liquidate Bitcoin in Response to US Stablecoin Regulations
**Story Highlights**
Tether may sell Bitcoin to comply with stricter US stablecoin regulations, says JP Morgan.
New STABLE and GENIUS Acts demand stricter reserve backing for stablecoins.
As of now, Tether holds 83,758 Bitcoin worth over $8 billion as part of reserves. Tether, the largest stablecoin issuer, might be compelled to sell some of its Bitcoin holdings to adhere to new US regulations, according to analysts at JPMorgan. The US has proposed two legislative measures, the STABLE Act and the GENIUS Act, to establish stricter rules for stablecoin issuers. These laws would require stablecoins to maintain reserves that are fully backed by liquid assets such as US Treasuries.
**Regulatory Pressure Mounts on Tether**
JPMorgan’s latest report underscores concerns regarding Tether’s compliance with these new bills. The STABLE Act permits state-level oversight and enforces stricter reserve rules, while the GENIUS Act requires federal oversight for large issuers but offers greater flexibility in reserve assets. Under the provisions of the House’s STABLE Act, only 66% of Tether’s reserves meet the compliance criteria, whereas the Senate’s GENIUS Act sets a slightly higher standard at 83%. This declining compliance ratio indicates that Tether’s capacity to meet these requirements has diminished since mid-2024 due to the rapid expansion of the stablecoin supply. If either bill is enacted into law, the report notes that Tether would need to restructure its reserves, shifting towards more liquid assets such as U.S. Treasuries.
**US Market Poses a Greater Challenge**
Tether has already encountered regulatory challenges in Europe, where the Markets in Crypto-Assets (MiCA) rules necessitate that large issuers maintain 60% of their reserves in EU-based banks. While this has resulted in delistings on several European exchanges, the impact was mitigated by Tether’s limited market share in the region. However, the U.S. represents a more significant challenge due to Tether’s dominant position in the American market. With U.S. lawmakers advocating for increased transparency and more frequent reserve audits, Tether could face heightened scrutiny. The demand for high-quality and liquid reserves may exert pressure on its dominant market presence.
**Will Tether Sell Bitcoin?**
Tether currently holds approximately 83,758 Bitcoin valued at over $8 billion as part of its reserves, according to Bitbo. In 2023, Tether announced intentions to allocate 15% of its quarterly profits to Bitcoin purchases. Despite its strong financial position, with a reported $13 billion in profits for 2024 and a reserve buffer exceeding $7 billion, regulatory changes may compel the company to liquidate a portion of its Bitcoin holdings. If U.S. regulations demand greater liquidity in its reserves, Tether may have no alternative but to adjust its asset allocation, potentially affecting the broader crypto market.