The log in of the outlaws

If Tether can prove to the industry that it can comply with regulations without sacrificing profit margins, it will solidify its position as an indispensable leader in the stablecoin industry.

Written by: Prathik Desai

Compiled by: Block unicorn

On July 18, Friday, U.S. time, the CEOs of the two largest stablecoin issuers in the world—Paolo Ardoino of Tether and Jeremy Allaire of Circle—sat side by side in the audience of the East Room of the White House. In front of them, President Donald Trump had just signed the GENIUS Act, which is the first federal regulation for stablecoins in the United States.

A few years ago, this moment was unimaginable.

Because once upon a time, Tether was the "problem child" in the cryptocurrency space. Traders loved it, regulators hated it, and investigations followed closely behind. It had paid fines, avoided audits, and had very little contact with U.S. regulatory agencies. But on this July afternoon, its CEO received public recognition from the President of the United States.

This is a signal that this "outlaw" stablecoin is ready to become a legitimate citizen.

The "GENIUS Act" is a long-awaited attempt at stablecoin regulation in the United States. The bill requires issuers to establish dollar-for-dollar reserves, conduct monthly audits, provide redemption guarantees, and establish a licensing system called "Licensed Payment Stablecoin Issuer" (PPSI). To qualify, issuers must hold highly liquid reserves, primarily in U.S. Treasury securities, undergo regular attestations by qualified accounting firms, and comply with U.S. anti-money laundering (AML) regulations.

Foreign issuers like Tether can participate as long as they meet the same standards and accept oversight from the Office of the Comptroller of the Currency (OCC). The law provides a loose but limited three-year transition period to meet these thresholds. This transition window is crucial as it gives Tether time to adjust its structure, reserves, and incorporate its flagship product USDT along with a new token that complies with U.S. regulations.

For Tether, headquartered in El Salvador, this public commitment marks a significant shift. After years of regulatory avoidance and operating in offshore jurisdictions, the company has finally entered the most scrutinized market in the world. Not out of desperation, but out of dominance.

Despite being shut out of the highly regulated U.S. market, Tether has consistently performed better in global markets. Its token USDT dominates trading pairs, is used for real-world payments in emerging markets, and circulates with unparalleled liquidity across more than 12 blockchains. The circulation of USDT exceeds $160 billion, with a net profit of $13 billion just last year, making it not only the largest stablecoin but also one of the most profitable financial institutions in the world.

This is exactly where the importance of Tether entering the United States lies.

Paolo Ardoino made it clear that Tether will comply with regulations. It plans to adjust its reserves, seek audits from the Big Four auditing firms, and work with the OCC to become a licensed foreign issuer under the new laws. Meanwhile, Tether will launch a second version of USDT that is limited to the United States, designed specifically for efficiency-focused institutions. This strategy aims to occupy both ends of the market: global cryptocurrency liquidity and the regulated space of the world's largest economy.

This new chapter of American finance focuses on large capital - fund issuers, banks, fintech companies, and hedge funds. For Tether, entering this market is not a matter of survival, but rather who will lead the next wave of global financial momentum.

If Tether can prove to the industry that it can comply with regulations without sacrificing profit margins, it will solidify its position as an indispensable leader in the stablecoin industry.

However, the cost of compliance is the elephant in the room.

Monthly audits conducted by large firms can cost tens of millions of dollars each year. Anti-money laundering systems require specialized staff and technology. Reporting obligations under U.S. law will subject companies to greater scrutiny and may even pose future political risks. There is also an opportunity cost: to meet liquidity and transparency requirements, it may be necessary to exclude higher-risk, higher-return investment tools from reserves. However, with its scale and profits, Tether is capable of bearing these costs.

For Tether, the transformation will bring cultural and operational challenges. The company has long positioned itself as an anti-establishment option, particularly in markets with high distrust of traditional institutions. A commitment to accept U.S. regulation may alienate this user base. In the past, Tether has faced criticism for freezing funds. Would users in Nigeria or Argentina trust a Tether that starts responding to U.S. subpoenas? If so, what will replace the sense of freedom that USDT once offered?

Moreover, compliance may not eliminate criticism.

Transparency advocates and financial regulators still question Tether's past record. Its previous refusal to provide a complete audit, opaque ownership structure, and alleged involvement in shadow banking remain topics of concern. Regulatory compliance may soothe institutions, but it will not immediately restore trust among the skeptical segments of the public.

At the same time, Tether risks giving up more market share to its closest competitor Circle.

As of July 25, Tether's dominance in the stablecoin industry has fallen to 61.76%, down eight percentage points from 69.69% in November 2024. During the same period, Circle's market share increased by four percentage points to 24.44%.

The USDC issuance institution headquartered in the United States also has an advantage in compliance. It has been subject to audits for a long time and maintains comprehensive regulatory coverage in 48 states in the US. Recently, it made its debut on Wall Street, causing a sensation. CEO Jeremy Allaire sees the "GENIUS Act" as a green light and points out that it effectively formalizes the model that Circle has adhered to for many years. Although Circle's market share has recently increased, there is still a long way to go for this company that has just made its debut on Wall Street.

In 2024, Tether recorded a profit of $13 billion. By the end of the year, it held $113 billion in U.S. Treasury bonds, $7 billion in reserve buffers, and over $20 billion in equities. As of March 31, 2025, Tether held $98 billion in U.S. Treasury bonds. With a conservative yield of 4.4%, its annual income has exceeded $4 billion. Even with compliance reducing the yield by 10-15%, its business model remains viable.

Compliance may also bring future revenue. A compliant Tether is a trustworthy Tether, which could lead to more business. For institutions that have remained on the sidelines so far, this might be the only incentive they need.

For years, USDC has had a trust advantage. It is transparent, regulated, and audited. However, its market capitalization growth has stagnated. Meanwhile, Tether is thriving in the shadows—growing faster, expanding into more regions, and becoming an indispensable presence in markets that American companies are reluctant to touch.

Support from the White House

With the political support of Commerce Secretary Howard Lutnick (former Cantor Fitzgerald, now Tether's reserve manager), Tether has gained assurance in Washington.

In addition, there are connections with Bitcoin reserve companies. Lutnik's son operates Cantor Equity Partners (CEP), a special purpose acquisition company that merged with Twenty One Capital—a Bitcoin-native company backed by Tether, SoftBank, and Cantor. This transaction further intertwines Tether's interests with the U.S. capital markets and policy circles.

With the law granting Tether a three-year transition period, it has enough time. With the advantage of global trading volume, it clearly has leverage.

The market landscape in the United States depends on scale. If Tether can grasp cost efficiency, it may solidify its leading position, making it difficult for Circle to compete, let alone other lagging stablecoin issuers or new entrants.

But this is a double-edged sword. The United States has just provided a blueprint for stablecoins. If Tether can execute well, it will continue to lead. If it stumbles on compliance, disclosure, and regulation, it may find that legitimacy can be revoked just as quickly as it was approved.

Throughout the history of cryptocurrency, Tether is the stablecoin used by most users, even if they do not trust it.

Now, it seeks to be the one they trust.