Last week, Tether, the indisputable champion of the stablecoin market, announced that it would be starting from scratch to launch USAT, a US-only, GENIUS Act-compliant stablecoin.
The launch is an act of necessity for a company that has to align with new U.S. laws or risk losing its position as the crypto market’s leading stablecoin. So how did we get here?
Rewind to 2014. Bitcoin is barely five years old, and a no name company in a mocked, infant industry, Tether, decides to issue a dollar-pegged cryptocurrency on Bitcoin called USDT.
Tether wasn’t the first – that title goes to BitShare’s now defunct BitUSD – but it would soon become the dominant stablecoin, and its success bred competitors.
In Bitcoin’s early days, USDT provided vital dollar liquidity for a market often verboten to the traditional financial system. USDT would become the USD proxy benchmark for bitcoin and other cryptocurrency trading pairs, and it would also come to serve as a synthetic, offshore bank account for people from China to Venezuela.
Now, Tether’s marketcap is $170 billion, and if the company were a nation, its U.S. Treasury bond holdings would make it the 18th largest holder. Tether and the stablecoin industry it ushered have become so consequential, that the U.S. Congress has passed legislation, the GENIUS Act, that clearly regulates the industry.
Signed on July 18, 2025, the GENIUS Act would ultimately push Tether, the largest stablecoin issuer, to design a made-for-America stablecoin, USAT, which it plans to launch at the end of 2025 subject to regulatory approval.
The U.S. government distinguishes USDT as a “foreign stablecoin issuer,” so USAT will move Tether into the compliance window with U.S.’s new stablecoin law. Here’s how.
What is Tether’s USAT?
Just like Tether’s flagship USDT, USAT will be a dollar-pegged stablecoin fully backed by USD, USD-assets like bonds, and other highly liquid investments.
Tether has tasked Anchorage Digital Bank to issue USAT, while Cantor Fitzgerald will custody the stablecoin’s collateral and related funds. Both of these partners satisfy the GENIUS Act’s requirements for stablecoins to work with domestic, federally chartered financial partners for issuance and custody. The USAT company will have its headquarters in Charlotte, North Carolina.
To help navigate the regulatory morass, Tether hired Bo Hines, a previous White House crypto council executive director. Hines said during the USAT launch press conference that he believes USAT will see meteoric growth in two years following its launch.
“I think our expansion will be exorbitant over the course of the next 12 to 24 months,” he said. We want people to know that Tether is here to participate in the U.S. economy in a huge way.”
Why is Tether launching USAT?
Tether is spinning up USAT to retain its dominance and keep pace with regulations as the U.S. government’s stance on stablecoins has changed.
For years, stablecoins have been one of the chief regulatory puzzles in crypto’s set of incorrigible policy issues. They ostensibly increase demand for dollars and Treasuries, but they are also non-state issued synthetic dollars that aren’t legal tender which are starting to account for a noticeable sum of online payments.
Some positives, some negatives, some neutrals. So stablecoins have always existed in this odd limbo where regulators and politicians weren’t sure what to make of them and they didn’t ban nor regulate them – just let them ride.
But now, the GENIUS Act lays out a few clear guidelines for what it takes to be a licensed stablecoin issuer in the U.S. The big ones are:
- Permitted Payment Stablecoin Issuers: The GENIUS Act establishes Permitted Payment Stablecoin Issuers (PPSIs), essentially companies that are legally allowed to issue stablecoins in the U.S. Without this distinction, a company cannot issue stablecoins in the U.S., list their coins on U.S. exchanges, or otherwise have financial institutions custody them.
- Reserve requirements: PPSIs will have a higher standard of reserve requirements than foreign issuers, including regular audits and compliance to AML / sanctions law. The GENIUS Act approves eligible reserves like cash, demand deposits, T-bills (Treasuries that mature in 93 days or less), overnight repos, certain approved money market funds, and others. The Act does not permit stablecoin issuers to hold bitcoin, other crypto, or long term bonds. (For USDT as of a January 2025 attestation, Tether held roughly 84% of its collateral in cash and equivalents like T-bills, with small shares in BTC, and other investments, according to CoinLaw).
- Reserves must always be on a 1-to-1 basis and the stablecoin issuer cannot rehypothecate funds. They also can’t issue interest to stablecoin holders (got to keep the bankers from pitching a fit).
- Foreign issuer exceptions: Generally speaking, the U.S. doesn’t want foreign-issued stablecoins, but the GENIUS Act carves out exceptions assuming the following:
- The foreign stablecoin issuer “is subject to regulation and supervision by a foreign payment stablecoin regulator that the Secretary of the Treasury determines is comparable under the Act.”
- The company registers with the U.S. Office of the Comptroller of the Currency.
- The stablecoin’s reserves are held in a U.S. financial institution.
- The stablecoin issuer isn’t domiciled in a U.S.-sanctioned nation.
What does USAT mean for the future of USDT?
As far as I can tell, USAT doesn’t mean Tether is discarding USDT.
But it does mean that USAT will suck up some market share from USDT by sheer necessity of the fact that USDT won’t be eligible to trade in the U.S after the law’s enactment deadlines unless it secures an exemption as a foreign stablecoin issuer the earlier terms.
It’s hard to imagine that Tether would go through all the trouble to create an entirely new stablecoin to be all buttoned-up for Big Brother and still go through the rigamarole of keeping USDT compliant – but who knows?
What I do know is that USAT was a do-or-die moment for one of crypto’s most powerful companies, and honestly, it was probably never in question once the GENIUS Act was passed. In fact, the legislation may have given Tether the poke it needed to solidify its presence in the U.S. with a regulated, domiciled entity.
Pour one out for USDC, which spent the last seven years building with U.S.-compliance as a cornerstone from day one only to have the king announce an invasion with the U.S.-government’s (pending) blessing.
At least in USDC’s favor from an investor standpoint, it’s public and Tether isn’t. But how long will that last?
