See More

Tether Regulation Proposal ‘Apocalyptic’ for Crypto

2 mins
Updated by James Hydzik
Join our Trading Community on Telegram

In Brief

  • The Stable Act could spell the end of Tether.
  • The US govt wants stricter controls over stablecoins.
  • Tether may be replaced with a regulated crypto dollar.
  • promo

Unregulated stablecoins such as Tether face increasing regulatory pressure from the U.S. government.

A new U.S. bill called the Stable Act is stirring anxiety in crypto circles. Passage could effectively put an end to billions of dollars of transactions and throw the industry back several years.

The Act, as reported by BeInCrypto, calls for banking licenses for stablecoin issuers such as Tether.

It doesn’t end there. The bill proposes additional requirements for Federal Reserve reporting. It also proposes issuance approval in addition to ongoing auditing requirements and an insurance policy to cover assets.

Another proposal may require stablecoin issuers to store their reserves directly at the FED. This puts them under control of the central bank and severely limits their open usage.

Apocalyptic for Tether, crypto

A report by Dragonfly Research offers a deep dive into current stablecoin usage. It concludes that, should the bill be passed, it could spell the end of Tether;

“Make no mistake: the day that Tether gets taken down will be apocalyptic.”

Tether is by far the largest and most used stablecoin. Its supply increased by 410% this year alone from $4.1 billion market capitalization in early January to $20.9 billion today according to the Tether Transparency Report.

Tether, or the ‘cryptodollar’ as the researcher labels it, revolutionized the industry over the past couple of years. It opened huge trading gateways with massive liquidity that were impossible by using fiat.

USDT has been a life raft for many citizens in countries with hyperinflation or strict currency controls. It also helped power the rise of DeFi alongside Ethereum.

However, multiple U.S. agencies and prosecutors are investigating Tether. The company has so far produced very little in the way of defense or audits.

Tether cannot sustain its monumental growth is unsustainable, the research added. The authors state that the day of its demise will bring down the entire industry.

“Crypto markets will seize, exchanges will be thrown into disarray, millions of crypto traders will likely have their assets frozen, and prices everywhere will plummet.”

The future of stablecoins

Currently, the Stable Act is just a proposal. It faces a lot of criticism from industry leaders and entrepreneurs, for example. They claim that the proposal sends the U.S. back into the dark ages in terms of innovation and digitization.

However, a recent Presidential Working Group statement bodes poorly for this crypto segment. The statement suggests that all stablecoin holders should be subject to KYC requirements, which indicates that stablecoins are still in the line of fire.

Tether may not be the future of the digital dollar. First, a regulated stablecoin that becomes the defacto standard is a likely replacement. Then, inevitably there will be more controls and identity checks from governments, banks, and tax authorities. If that is the case, the freedoms we have today with digital money movement could be a thing of the past.

Top crypto projects in the US | July 2024
Harambe AI Harambe AI Explore
Uphold Uphold Explore
Exodus Exodus Explore
Coinbase Coinbase Explore
Chain GPT Chain GPT Explore
Top crypto projects in the US | July 2024
Harambe AI Harambe AI Explore
Uphold Uphold Explore
Exodus Exodus Explore
Coinbase Coinbase Explore
Chain GPT Chain GPT Explore
Top crypto projects in the US | July 2024

Trusted

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

profile.jpg
Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...
READ FULL BIO
Sponsored
Sponsored