Tether in Trouble? U.S. Senate Just Passed a Law That Could Dethrone the $155B Stablecoin King

On June 17, the U.S. Senate passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS) with bipartisan support, marking the first major crypto legislation approved by the chamber. The bill now moves to the House of Representatives and, if passed unchanged, could reach President Trump's desk for signing soon.

Key Provisions of the GENIUS Act

The legislation imposes strict transparency and operational requirements, bringing stablecoins under heightened federal oversight:

• Eligible Issuers: Only regulated entities—insured bank subsidiaries or qualified issuers—and approved foreign issuers from compliant jurisdictions may operate.

• Reserve Mandates: 1:1 backing with cash, Fed deposits, short-term Treasuries (≤93 days), or overnight reverse repos.

• Audits & Compliance: Monthly PCAOB-standard audits and Bank Secrecy Act adherence.

• Tech Giant Ban: Companies like Meta and Amazon are barred from issuing stablecoins unless meeting stringent financial/data privacy rules.

Tether’s Existential Threat

Tether (USDT), the $155B market leader, faces severe compliance hurdles:

• Reserve Shortfall: Its Q1 2025 report shows just 85% cash/cash-equivalent backing, falling short of the 100% requirement.

• Audit Issues: Auditor BDO Italia lacks PCAOB certification.

• Geopolitical Shift: Tether recently relocated to crypto-friendly El Salvador but may lose U.S. market access within three years post-enactment.

CEO Paolo Ardoino hinted at launching a compliant U.S. subsidiary, but margin loans—a key USDT issuance mechanism—would be prohibited.

House Hurdles & Political Firestorms

The House Financial Services Committee has its own Stablecoin Transparency and Accountability Act, creating potential roadblocks. Critics, including Sen. Elizabeth Warren (D-MA), warn of loopholes:

"The GENIUS Act lets Trump cut deals with El Salvador to exempt Tether... It also allows billionaires like Musk and Bezos to launch surveillance stablecoins—then demand bailouts when they fail."

Despite opposition, Trump allies—including Commerce Secretary Howard Lutnick (ex-Cantor Fitzgerald CEO, Tether’s former reserve custodian)—are pushing for passage by August.

Market Implications

With $250B+ in circulating stablecoins (per Chainlink), compliant players like Circle (USDC) and bank-issued tokens stand to gain. 

The bottom line: Tether’s era of unchecked dominance may be ending—but whether Washington delivers a death blow or a negotiated retreat remains uncertain.

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