JPMorgan Warns Tether May Sell Bitcoin Amid US Stablecoin Regulations

Tether, the biggest stablecoin issuer, might be forced to sell some of its Bitcoin holdings to follow new US regulations, says JPMorgan analysts. The US has proposed two laws, the STABLE Act and the GENIUS Act to set stricter rules for stablecoin issuers. These laws would require stablecoins to have reserves fully backed by liquid assets like US Treasuries.

Regulatory Pressure Mounts on Tether

JPMorgan’s latest report highlights concerns over Tether’s compliance with these new bills. The STABLE Act allows state-level oversight and enforces stricter reserve rules, while the GENIUS Act mandates federal oversight for large issuers but offers more flexibility in reserve assets.

Under the House’s STABLE Act, only 66% of Tether’s reserves meet the compliance criteria, while the Senate’s GENIUS Act sets a slightly higher bar at 83%.

This declining compliance ratio suggests that Tether’s ability to meet these requirements has weakened since mid-2024 due to the rapid expansion of stablecoin supply.

If either bill becomes 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 faced regulatory hurdles in Europe, where the Markets in Crypto-Assets (MiCA) rules require large issuers to hold 60% of reserves in EU-based banks.

While this led to delistings on several European exchanges, the impact was softened by Tether’s limited market share in the region. However, the U.S. presents a more significant challenge due to Tether’s dominant position in the American market.

With U.S. lawmakers pushing for more transparency and frequent reserve audits, Tether could face increased scrutiny. The demand for high-quality and liquid reserves could put pressure on its dominant market presence.

Will Tether Sell Bitcoin?

Tether currently holds around 83,758 Bitcoin valued at over $8 billion as part of its reserves, according to Bitbo. In 2023, Tether announced plans to allocate 15% of its quarterly profits to Bitcoin purchases.

Despite its robust financial standing, with a reported $13 billion in profits for 2024 and a reserve buffer exceeding $7 billion, regulatory changes may force the company to liquidate a portion of its Bitcoin holdings.

If U.S. regulations demand greater liquidity in its reserves, Tether may have no choice but to adjust its asset allocation, potentially impacting the broader crypto market.