The Outlaws' Log In: How Tether Plans to Return to the U.S.

Author: Prathik Desai

On July 18, Friday in U.S. time, the two major stablecoin issuers in the world—Tether's Paolo Ardoino and Circle's Jeremy Allaire—sat side by side in the audience of the East Room of the White House. In front of them, U.S. President Donald Trump had just signed the GENIUS Act, marking the first federal regulations 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. It had paid fines, avoided audits, and had very little contact with U.S. regulators. But on this July afternoon, its CEO received public recognition from the U.S. President.

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

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

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 compliant with U.S. regulations.

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

Despite being shut out of the highly regulated U.S. market, it consistently performs better in the global market. 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 circulating supply 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 precisely where the importance of entering the United States lies.

Paolo Ardoino clearly stated: they will comply with regulations. It plans to adjust its reserves, seek audits from the Big Four accounting firms, and collaborate with the OCC to become a licensed foreign issuer under the new law. Meanwhile, a second version of USDT limited to the United States will be launched, specifically designed for efficiency-focused institutions. This strategy aims to simultaneously occupy both ends of the market: global cryptocurrency liquidity and the regulated landscape of the world's largest economy.

This new chapter in American finance focuses on large funds — fund issuers, banks, fintech companies, and hedge funds. For them, entering this market is not a question of survival, but rather who will lead the next wave of global financial trends.

If it 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, higher-risk, higher-return investment instruments may need to be excluded from reserves. However, with its scale and profits, it is capable of bearing these costs.

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

In addition, compliance may not eliminate criticism.

Advocates for transparency and financial regulators continue to express doubts about Tether's past record. Its previous refusal to provide complete audits, opaque ownership structure, and alleged involvement in shadow banking remain topics of concern. Regulatory compliance may soothe institutions, but it will not immediately rebuild trust among the skeptical segments of the public.

At the same time, Tether runs the risk of ceding more market share to its closest competitor Circle.

As of July 25, Tether's dominance in the stablecoin industry has decreased 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 issuing institution, headquartered in the United States, also has a lead 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 views the "GENIUS Act" as a green light and points out that it formally establishes the model that Circle has been following for years. Although Circle's market share has increased recently, there is still a long way to go for this company that has just made its first appearance on Wall Street.

In 2024, Tether recorded a profit of 13 billion dollars. By the end of the year, it held 113 billion dollars in U.S. Treasury bonds, 7 billion dollars in reserve buffers, and over 20 billion dollars in equity. As of March 31, 2025, Tether held 98 billion dollars in U.S. Treasury bonds. With a conservative yield of 4.4%, its annual income has exceeded 4 billion dollars. Even with compliance reductions of 10-15% in yield, 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 until now, this may be the complete 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 secured a foothold in Washington.

In addition, there are connections with Bitcoin reserve companies. Lutnick'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 deal further intertwines the interests of with the U.S. capital markets and policy circles.

With the law granting a three-year transition period, it has sufficient 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-effectiveness, 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 executed well, it will continue to lead. If it stumbles on compliance, disclosure, and regulation, it may find that legitimacy can be revoked as quickly as it was granted.

Throughout the history of cryptocurrency, stablecoins have been used by most users, even if they do not trust them.

Now, it seeks to become the one they trust.