Tether May Need to Sell Bitcoin to Meet Proposed US Stablecoin Rules, Says JP Morgan

Stablecoin giant Tether may have to sell some of its Bitcoin in order to comply with proposed U.S. regulations, according to a report from the world’s biggest bank, JP Morgan. 

In a Wednesday report, the banking giant said that under potential new regulations in the U.S. seeking to keep a close watch on stablecoin issuers, a significant chunk of Tether’s current reserves would not be compliant. 

Tether is the biggest issuer of stablecoins, or cryptocurrencies backed by less-volatile assets. Stablecoins are typically tied to gold, dollars, or the euro so that traders can easily enter and exit trades. 

“Under the proposed bills, Tether would have to implicitly replace its non-compliant assets with compliant assets,” the report reads.

“This would imply sales of their non-compliant assets (such as precious metals, Bitcoin, corporate paper, secured loans and other investments) and purchases of compliant assets such as T-bills,” it added. “U.S. stablecoin regulations requiring more transparency and frequent reserve audits pose additional challenges to Tether.”

However, the proposed regulations could change as the legislation isn’t final, and could shift before being voted on.

“Tether is closely monitoring the evolution of the different U.S. stablecoin bills and also actively engaging with local regulators,” a spokesperson told Decrypt. “Consultation from the industry needs to happen, and it’s still unclear which bill will move forward.”

Furthermore, Tether is not based in the U.S.—it recently relocated to El Salvador from the British Virgin Islands—so whether or not it would have to comply with American regulators remains unclear.

A Tether spokesperson pushed back against JP Morgan’s report, noting that the banking giant “discounts the fact the Tether’s Group equity is over $20 billion in other very liquid assets, and is generating more than $1.2 billion in profits per quarter through U.S. Treasuries.”

“Adapting [to] new requirements will be straightforward,” the spokesperson added.

Tether CEO Paolo Ardoino appeared to take aim at the report in a pair of tweets early Thursday.

“JPM analysts are salty because they don’t own Bitcoin,” he wrote, later adding: “Tether analysts say that JPM does not have enough Bitcoin.”

A Tether spokesperson echoed Ardoino’s comments, telling Decrypt: “Those analysts at JP Morgan seem a bit jealous that they didn’t buy Bitcoin cheap, and [it makes] them salty. But clearly they don’t understand either Bitcoin [or] Tether. And they won’t have a cheap event to buy Bitcoin. No one feels sorry for them.”

Tether’s flagship product is USDT, a digital dollar that runs on a number of major crypto networks, including Ethereum, Solana, Tron, and soon Bitcoin.

USDT is the third-largest cryptocurrency by market cap and the biggest in terms of 24-hour trading volume, according to CoinGecko, with $32.8 billion tokens having traded hands in the past day alone.

The company in the past has attracted controversy, with regulators and lawmakers pointing out that it has been slow to provide documentation to prove that U.S. dollars do indeed back USDT.

And in 2021, Tether agreed to no longer do business in New York after a two-year state attorney general investigation found it had “made false statements about the backing” of its stablecoin.

But the company now points to quarterly attestations and transparency reports as proof of its compliance, and has been working closely with law enforcement to freeze funds suspected to be used by criminals. 

Cantor Fitzgerald, a firm run by President Donald Trump’s pick for Commerce Secretary, Howard Lutnick, custodies Tether. Lutnick has defended Tether as a company, including in his recent confirmation hearing.

Edited by Andrew Hayward