Tether log in to the United States

Source: Galaxy; Compiled by Golden Finance

Tether launched USAT last week, a US-regulated dollar-backed stablecoin that will be officially issued by Anchorage Digital Bank (Anchorage Digital Bank), with Cantor Fitzgerald serving as the reserve custodian. Bo Hines, the executive director of the former president's digital asset working group, will serve as the CEO of Tether USA. Tether has not converted its flagship product USDT, valued at over $170 billion, into a stablecoin compliant with the US GENIUS Act, but instead has adopted a dual-track approach: launching a product specifically for the US domestic market that is regulated, alongside its massive offshore market.

This approach of "starting a new stove" is very persuasive. In the USDT's reserve portfolio of over $170 billion, about 80% (approximately $130 billion) is allocated to low-risk U.S. Treasury bonds and cash equivalents, while about 20% (approximately $40 billion) is allocated to Bitcoin, gold, loans, and "other" investments, which does not meet the collateral requirements set forth in the landmark stablecoin legislation enacted in the U.S. this summer. Rebalancing its holdings is not only operationally complex, but it may also cause significant slippage; it would also compress Tether's net profit margin and reduce the massive profits generated by its venture capital division, which brings about $20 billion in dividends.

USAT has been built around short-term government bonds, cash, and repurchase agreements (repos) from day one, which is entirely consistent with the model outlined by lawmakers in the GENIUS Act. The appointment of Hines as the CEO of this American entity adds a noticeable political color to the issuance. Hines's appointment mitigates Tether's reputational risks as it is closely linked to policymakers and the executive branch; the Trump family's World Liberty Financial successfully employed this strategy prior to its token issuance.

Galaxy's perspective:

Tether is building a regulated U.S. distribution tool while maintaining the integrity and profitability of its offshore model. The company is engaging in regulatory arbitrage: providing a safe, narrow space for U.S. investors while continuing to achieve compounded returns globally. The real test is whether USAT can erode Circle's leading position in U.S. trading and gain momentum in the U.S. market. If USAT struggles, it could signal greater trouble for stablecoins that meet the GENIUS standards. Such stablecoins only offer two advantages to investors: enforceable investment authorization on stablecoin reserves and regulatory approval from the U.S. government. The former only has an advantage when comparing GENIUS-compliant stablecoins with other non-yielding stablecoins; there is a greater desire for stablecoin backing to be stable and easily redeemable. Regulatory approval is only an advantage because the uncertainty of regulation hinders traditional institutional players from using and accepting stablecoins. Although institutional absorption of cryptocurrencies has rapidly increased this year, we have not yet seen a rush to mint compliant stablecoins like USDC. In contrast, the fastest-growing stablecoin this year is Ethena's USDE, primarily due to the yields it pays to holders, which are explicitly prohibited by the GENIUS Act.

Whether stablecoins compliant with the GENIUS Act represent a final outcome is still up for debate, but the value of Tether's involvement is undeniable. This is a cost-effective attempt for Tether; it has established partnerships with custodians and banks for traditional asset management, possesses tokenization technology, and has robust partner distribution channels. Even if this attempt yields no results, Tether's losses would be minimal; it will continue to achieve compound returns in overseas markets, perhaps with the most profitable team of employees globally. However, if stablecoins compliant with the GENIUS Act become the norm and dominate the market, this could propel Tether's circulation from hundreds of billions of stablecoins to the first trillion-dollar stablecoin.