Tether has only two years left in the US market. The GENIUS Act, signed into law by President Trump on July 18, 2025, granted stablecoin issuers a three-year grace period to comply, leaving the countdown running until July 2028.
Tether’s primary challenge lies in its asset structure. Approximately 25% of USDT reserves are currently held in precious metals, secured loans, and Bitcoin. The GENIUS Act prohibits this, mandating that all stablecoin reserves must be fully backed by cash or US Treasury securities.
El Salvador-based Tether has yet to disclose concrete plans to overhaul its reserves to comply with the new law. This stands in contrast to statements from CEO Paolo Ardoino, who pledged readiness to comply when the legislation was signed last year. By comparison, its primary US-based rival, Circle, is considered far better prepared to meet GENIUS Act standards well ahead of the official deadline.
Alternative Routes and Slow Regulatory Progress
Tether previously explored alternative avenues, launching USAT, a new US-focused stablecoin in partnership with Anchorage Digital bank. However, market adoption of USAT remains low, and it has yet to replace USDT’s role.
On the government side, US regulatory agencies have also moved slowly. The Treasury Department, OCC, FDIC, and Federal Reserve have so far only issued draft proposals. No final rules have been enacted, even though the one-year milestone since the law’s signing has already passed.
This situation has sparked debate among legal experts. Some argue that foreign issuers like Tether have a safe harbor to operate until July 2028. Conversely, others warn that foreign firms must comply immediately once the GENIUS Act officially takes effect, expected in January 2027.
The Market Will Not Wait for Final Rules
Financial institutions may not wait for regulatory certainty to begin moving away from USDT. Kevin Wysocki of Anchorage Digital emphasized that non-compliant stablecoins will no longer be usable by US institutions once the grace period expires in 2028. “We don’t expect the market to sit and wait,” he stated.
Administrative hurdles also present a significant challenge. Justin Levine from law firm Davis Polk warned that while foreign issuers still have time, they must begin technical preparations now. The formal registration process with the OCC requires extensive preparation that takes considerable time.
Given USDT’s status as the world’s largest stablecoin, its potential removal from US platforms could hit global crypto market liquidity hard. The ball is now in Tether’s court: overhaul 25% of its reserve assets as quickly as possible, or risk being ousted from the world’s largest institutional market.
Sourced from CoinDesk.
Also read: What Is DeFi (Decentralized Finance)?
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
