The U.S. "GENIUS" stablecoin bill has passed: Tether (USDT) may face severe challenges, will the market landscape be reshuffled?

Gate News, the U.S. Senate passed the "Guidance and Establishment of the American Stablecoin National Innovation Act" (GENIUS Act) in June, aimed at officially incorporating stablecoins into the financial mainstream, opening a new chapter for the crypto assets market. However, according to a report by The Wall Street Journal (WSJ) on the 25th, if the bill ultimately becomes law, it will fundamentally change the game rules of the stablecoin market, but it will pose a severe challenge for the current market leader Tether (USDT): the bill sets strict compliance thresholds, and if Tether fails to meet the standards, it could be expelled from the U.S. market, becoming the biggest loser of the bill.

1. The Core Essence of the GENIUS Act: Consolidating Dollar Hegemony and Strict Regulation

The "GENIUS Act" is the first federal-level comprehensive regulatory framework for stablecoins in the United States. Its core objective is to consolidate the dominance of the US dollar in the global digital economy and continuously create demand for the dollar and US debt. The main content of the act includes:

Reserve asset requirements: The issuer of stablecoins must maintain a reserve ratio of at least 1:1, and the reserve assets must be high liquidity assets, such as US coins and currency, bank demand deposits, US Treasury bills/bonds/notes with a maturity of less than 93 days, repurchase/reverse repurchase agreements, and money market funds. Additionally, the issuer is required to publish a report on the composition of the reserves on a monthly basis.

Define the legal status of stablecoins: Clearly state that "payment stablecoins" are payment or settlement tools, not national currencies or securities. The issuer is obligated to convert, redeem, or repurchase at a fixed currency value, and may only engage in the issuance/redemption of stablecoins, management of reserves, and related businesses.

Authorized issuers: Only subsidiaries of approved custodial institutions, approved federal qualified non-bank payment stablecoin issuers, and state qualified payment stablecoin issuers (with a total market capitalization not exceeding 10 billion USD) are allowed to issue stablecoins. Foreign payment stablecoins are restricted unless they can comply with U.S. regulations or adopt a "reciprocal arrangement."

Consumer protection and anti-money laundering: Reserve assets are prohibited from being pledged/re-mortgaged/reused, and stablecoin holders enjoy priority repayment rights in the event of the issuer's bankruptcy. Issuers must comply with anti-money laundering regulations under the Bank Secrecy Act, including KYC, due diligence, suspicious transaction reporting, and more.

Prohibition of Yield-Generating Stablecoins: No issuer may pay interest or other forms of yield on stablecoins held by users, aiming to eliminate the gray area between stablecoins and traditional high-risk yield products.

2. The Severe Challenges Faced by Tether: Reserve Structure and Compliance Dilemma

The "GENIUS Act" poses a significant challenge to Tether:

Reserve assets are not compliant: Tether currently holds two-thirds of the stablecoin market share, with a total circulation of 156 billion USD, but its reserves are backed by Bitcoin and precious metals, which does not meet the bill's requirements for "high liquidity and safe assets." Former federal prosecutor Scott Armstrong clearly pointed out that if Tether does not rectify this, it may struggle to establish itself in the U.S. market.

Regulatory Compliance Pressure: Tether's stablecoin (USDT) is popular in international payments due to its convenience, especially in emerging markets, but it has also faced controversy for its involvement in illicit activities such as sanctions evasion. The bill requires issuers to register with U.S. regulatory agencies unless they are subject to foreign regulations similar to U.S. rules. The Senate version offers a three-year grace period, while the House version provides 18 months, leaving time for Tether's compliance adjustments, but time is tight.

Tether recently announced that it will relocate its headquarters to El Salvador, seeking a "comparative test" exemption in local regulations while evaluating the launch of a new stablecoin that complies with U.S. regulations. However, if it ultimately fails, Tether may be forced to exit the U.S. market.

3. Circle Benefits and New Market Landscape: Compliance Competitive Advantage Highlighted

In stark contrast to Tether is its American competitor Circle. As the second largest stablecoin (USDC) issuer, Circle went public this month on the New York Stock Exchange. After the GENIUS Act passed the Senate, Circle's stock price surged by 34%, reflecting the market's optimistic outlook on its compliance prospects. Although Circle's stablecoin circulation is less than half that of Tether, its more transparent financial structure makes it better suited to adapt to new regulations.

In addition, the "GENIUS Act" has also sparked broader market participation. Banks are exploring partnerships to launch joint stablecoins, while retail giants like Walmart and Amazon are also considering issuing stablecoins, signaling that stablecoins could become everyday payment tools. These new participants may pose greater competitive pressure on Tether.

4. The Future of Stablecoins: Dollar Digitization and the Reshaping of Global Finance

The rapid development of stablecoins not only represents a new form of crypto assets but also brings changes to traditional fiat currencies. Approximately 99% of the market value of stablecoins is pegged to the US dollar, so stablecoins can essentially be regarded as "digital dollars" and serve as a bridge connecting "traditional finance" and "crypto finance." Stablecoins are not competitors to the US dollar; rather, they are important tools that help extend the US dollar system.

The passage of the GENIUS Act is undoubtedly a major boon for the overall crypto industry, but its more profound impact lies in the consolidation of the US dollar's status and the boost it provides to the demand for US Treasury bonds. The Act clearly stipulates that the reserve assets for stablecoins must be US dollars and US Treasury bonds, aiming to reinforce the hegemony of the dollar in the global digital economy. At the same time, the Act prohibits yield-bearing stablecoins, reducing their competitive relationship with the US dollar (sovereign currency) or bank deposits, and avoiding strict regulation under securities law, thereby reserving space for innovation in payment systems.

From the demand side, emerging markets are actively embracing stablecoins to address issues such as the pressure of local currency depreciation and high costs of cross-border remittances. From the supply side, the trading volume of stablecoins has surpassed that of traditional payment systems, and payment giants like Visa and Mastercard have chosen to "join instead of fight," actively integrating stablecoins.

Conclusion:

The passage of the "GENIUS Act" marks a new milestone in the regulation of stablecoins in the United States. It not only brings unprecedented compliance requirements to the stablecoin market but also signals a profound reshuffling of the market. Tether, as the market leader, is facing unprecedented compliance pressures, and its future in the U.S. market remains uncertain. In contrast, publishers like Circle, which have a higher degree of compliance, are expected to gain greater development opportunities under the new regulatory framework. This transformation will not only reshape the competitive landscape of the stablecoin market but also accelerate the extension of the USD in the digital world, as well as the deep integration of traditional finance and encryption finance, injecting new vitality into the global financial system.