JPMorgan says Tether may need to sell bitcoin to comply with proposed US stablecoin regulations

Tether may have to sell non-compliant assets — including bitcoin, precious metals, corporate paper and secured loans — to comply with proposed U.S. stablecoin regulations, according to JPMorgan analysts.

The U.S. has introduced two stablecoin bills — the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act in the House and the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in the Senate — seeking to regulate stablecoin issuers with licensing requirements, risk management rules and 1:1 reserve backing.

Under the House's STABLE Act, only 66% of Tether's reserves are compliant, while under the Senate's GENIUS Act, 83% meet standards, JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report on Wednesday. Notably, both figures suggest a declining compliance ratio since mid-2024 as stablecoin supply surged, the analysts said.

Tether currently holds about 83,758 bitcoin, worth over $8 billion at current prices, as part of its reserves, according to its bitcoin address first confirmed by The Block in 2023. Tether first announced in 2023 its plan to allocate up to 15% of its quarterly profits to purchasing bitcoin.

Last month, Tether released its Q4 2024 attestation report, detailing the assets held as reserves for its issued stablecoins as of Dec. 31, 2024. The company reported that its reserve buffer surpassed $7 billion for the first time and that it recorded $13 billion in profits for 2024.

'Challenges to Tether'

The STABLE Act enforces stricter reserve requirements and allows state-level regulation, while the GENIUS Act mandates federal oversight for large issuers and permits a broader range of reserve assets. If either bill passes, the analysts said Tether would need to restructure its reserves, shifting holdings into U.S. Treasuries and other liquid assets.

Tether, which controls nearly 60% of the stablecoin market, has already faced regulatory scrutiny in Europe, where the Markets in Crypto-Assets (MiCA) rules require large issuers to hold 60% of reserves in European Union banks. This led to Tether's delisting from several exchanges in Europe, though its limited market share in the region softened the impact, the analysts said.

In contrast, the U.S. market poses a much greater regulatory challenge for Tether, given the company's market share in the U.S. is more significant, according to the analysts. With both proposed bills requiring high-quality and liquid assets as reserves, the analysts said that Tether's dominant position in the U.S. could come under pressure.

"U.S. stablecoin regulations requiring more transparency and frequent reserve audits pose additional challenges to Tether," they said.

The proposed U.S. stablecoin regulations are expected to be enacted later this year.

(Updated to mention Tether's current bitcoin holdings)