Galaxy head of research Alex Thorn believes the GENIUS Act could favor Tether by allowing it to operate under relatively flexible conditions.

Thorn assessed that the bill would open a pathway for Tether to register onshore but would not require it to do so to continue operations.

Limited restrictions for offshore issuers

Based on the bill’s current text, if Tether chooses not to register under the new framework, it would not be violating any laws. 

Under the bill’s current language, the primary restrictions on non-registered stablecoin issuers like Tether would include interbank settlement prohibitions and marketing their tokens as “stablecoins” within the US. 

Thorn said the first restriction is not currently a significant issue for Tether but could impact future adoption in institutional finance. 

The second restriction, which was reportedly introduced as an amendment during a recent Senate Banking Committee session, would prevent Tether from advertising USDT as a stablecoin within the US market but would not stop it from being traded onshore.

The GENIUS Act proposes a regulatory framework for stablecoins, defining rules for issuance and oversight. The regulation includes a 1:1 reserves requirement, consisting of US dollars, insured bank deposits, or short-term Treasury bills.

The Senate Banking Committee approved the bill on March 13 with bipartisan support. It is now clear for a full Senate vote.

Registration pathways

The GENIUS Act appears to provide Tether with a clear option to register as a stablecoin issuer in the US, likely through the Office of the Comptroller of the Currency (OCC). If it chooses this route, Tether could either register USDT fully or create a subsidiary that issues a compliant version of the token. 

However, if Tether does not register, it can still operate in the US if it adheres to compliance requirements set by the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), which it already does.

Thorn added that the bill provides important clarifications regarding anti-money laundering protections. The US Treasury will only designate a foreign, non-registered issuer as non-compliant if it fails to comply with lawful orders to freeze or seize assets. 

This designation would not be automatic for all non-registered stablecoin issuers. Tether has a history of complying with such orders and has frozen at least 2,150 addresses to date, which suggests it would not be at immediate risk of being classified as non-compliant under the GENIUS Act.

Additional restrictions

The analyst also highlighted new amendments to the bill that introduce further limitations on offshore, non-registered stablecoins. 

Specifically, stablecoins issued by entities not registered under the framework would not be treated as cash equivalents for accounting purposes.

They would not be eligible for margin or cash equivalency treatment by broker-dealers, swap dealers, futures commission merchants (FCMs), or derivatives clearing organizations (DCOs). 

Thorn reiterated that these measures would limit unregistered stablecoins’ financial and institutional use but would not bar their existence or prevent trading within the US market.

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