The recently passed GENIUS Act could significantly impact Tether (USDT-USD), which is the company behind the world’s largest stablecoin. The new legislation, which is awaiting final approval, would introduce strict regulations for stablecoin issuers that include detailed rules on financial disclosures and reserve transparency. As a result, Tether’s current model could be at risk, as the bill targets companies that don’t fully disclose the quality and composition of their reserves.
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If the law is enacted, stablecoin issuers would need to provide monthly, audited reports that show exactly what is backing their tokens. This requirement comes as regulators grow increasingly worried about the liquidity of certain reserve assets during times of market stress. Indeed, Tether’s use of assets like bitcoin and gold (GLD)—combined with its limited transparency—could make it difficult for the company to comply with the new standards, according to a Wall Street Journal report quoting former federal prosecutor Scott Armstrong.
While Tether does hold a large share of its reserves in U.S. Treasury bills, which are seen as highly liquid and safe, regulators remain cautious. This is because as stablecoins become more widely used, they could potentially create new risks in the short-term Treasury market. The GENIUS Act also requires stablecoin companies to register with U.S. regulators, unless they’re based in a foreign country with similar oversight. Since Tether is headquartered in El Salvador, its ability to continue serving U.S. users may depend on whether American authorities view Salvadoran regulations as strong enough.
Is COIN Stock a Good Buy?
Although Tether might not benefit from the new GENIUS Act, crypto exchange Coinbase (COIN) looks like it might. As a result, Wall Street analysts have a Moderate Buy consensus rating on COIN stock based on 13 Buys, 11 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. However, the average COIN price target of $274.15 per share implies 22.9% downside risk following its recent rally.
