Legislative Background and Initial Rejection
The GENIUS Act (S.1582), aimed at regulating stablecoins and digital assets, faced initial rejection due to concerns over its scope and readiness. Some senators hadn’t read the text, leading to a failed vote to begin formal debate. However, a new vote is anticipated by the end of May 2025, reflecting ongoing efforts to refine crypto legislation.
Key Amendments in the Latest Version
The revised bill, accessible at Congress.gov, introduces significant changes:
- Foreign Stablecoin Issuer Regulation: The bill now requires foreign-based stablecoin issuers, such as Tether, to comply with U.S. regulations if they serve U.S. users. This extraterritoriality concept could bring Tether under U.S. oversight for the first time, addressing transparency concerns given its $150 billion market cap.
- Expanded Digital Asset Service Providers: The definition now includes developers, validator nodes, and self-custody wallet providers. These entities must adhere to the Bank Secrecy Act and anti-money laundering (AML) laws, potentially affecting Tether’s ecosystem.
- Safe Harbor Provision: A new “Safe Harbor” authority allows the Treasury Secretary to exempt small-scale or experimental projects, criticized for potential executive overreach.
These changes aim to enhance consumer protection and regulatory clarity but raise questions about compliance costs for foreign issuers like Tether.
Impact on Tether
Tether, known for its USDT stablecoin, could face significant regulatory scrutiny. The bill’s extraterritoriality provision means Tether must comply if it serves U.S. users, potentially requiring registration via the Office of the Comptroller of the Currency (OCC). If unregistered, Tether faces restrictions like prohibitions on interbank settlements and marketing USDT as a “stablecoin” in the U.S., though it can still operate by complying with OFAC and FinCEN regulations.
Interestingly, the bill also benefits Tether by expanding asset types for backing stablecoins, aligning with its role as the seventh-largest foreign buyer of U.S. Treasuries in 2024 . However, unregistered stablecoins won’t be treated as cash equivalents, limiting institutional use but not barring trading in the U.S.
Bipartisan Support and Controversy
The bill has Republican sponsors, including Sens. Bill Hagerty, Tim Scott, Cynthia Lummis, and Dan Sullivan, but lost Democratic co-sponsors Sens. Kirsten Gillibrand and Angela Alsobrooks. This shift suggests a more conservative approach, yet controversy persists. Senate Minority Leader Chuck Schumer has raised concerns about treating foreign companies like Tether, while some see the Safe Harbor provision as executive overreach.
X posts from @WuBlockchain and @wublockchain12 highlight the bill’s expansion of jurisdiction over foreign issuers, reflecting real-time discussions