The U.S. Congress has officially passed a new regulatory legislation called the "GENIUS Act" (Guiding and Establishing National Innovation for U.S. Stablecoins), which delineates clear regulatory boundaries for the long-ambiguous U.S. dollar stablecoin market. This act is seen in Washington as part of a strategy to promote compliance in crypto finance and enhance the global competitiveness of the digital dollar, but the signals it sends have already shaken the entire crypto market landscape. The most affected party is undoubtedly Tether (USDT), the issuer of the dollar stablecoin with the highest market share.

1. The GENIUS Act Aims to Reshape the Rules of "Dollar Stablecoins"

The core spirit of the GENIUS Act is to promote the "comprehensive compliance" of dollar stablecoins: it requires that all stablecoins circulating to U.S. users must be issued by entities licensed by U.S. financial regulators and must undergo periodic audits and capital adequacy monitoring. The act particularly emphasizes that all stablecoin assets must achieve 100% full reserves and must be held in regulated financial institutions within the U.S., subject to the oversight of the Federal Reserve System.

In other words, the passage of the GENIUS Act marks the U.S. government's determination to pull stablecoins back from the crypto "gray area" into the traditional financial regulatory framework. This is akin to a systematic "pulling the rug" for Tether, which has long operated on the regulatory edge and is headquartered overseas.

2. Tether's "Offshore Advantage" is Being Weakened

As the largest stablecoin by market capitalization globally, USDT has relied on a "flexible asset reserve structure" and an "offshore jurisdiction setup" over the past few years, clearly outpacing competitors in compliance costs and market responsiveness. Tether is headquartered in the British Virgin Islands and has long been free from direct oversight by the U.S. Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC), facing significant controversy regarding fund flow and transparency.

However, the introduction of the GENIUS Act has sharply narrowed this "offshore operational space." U.S. regulators are expected to require trading platforms, payment service providers, banks, and other financial interfaces to distinguish between "compliant currencies" and "non-compliant currencies" when accepting dollar stablecoin transactions. In other words, if Tether does not choose to return to the U.S., apply for a license, and accept regulation, it may be excluded from the U.S. domestic financial circulation system. This not only means that USDT will lose the core U.S. market but may also undermine its status as a global reserve currency.

3. Circle May Become the Biggest Beneficiary of the GENIUS Act

In contrast to Tether, Circle (the issuer of USDC) has proactively pursued compliance. Over the past two years, Circle has not only continuously promoted asset audit transparency but has also actively cooperated with guidance from multiple U.S. regulatory agencies. After the introduction of the GENIUS Act, Circle has become one of the first "naturally compliant" stablecoin companies and is expected to directly benefit from this regulatory dividend.

Especially within the U.S. financial services system, USDC has gradually penetrated major payment networks such as Visa, Mastercard, and Paypal. After the act's passage, these payment networks will be more inclined to support USDC, which is already registered in the U.S., has clear audits, and is regulatory-friendly, when integrating compliant currencies. This official endorsement may, in the medium to long term, enable USDC to surpass USDT in market share, particularly in high-value scenarios such as business-to-business (B2B) payments and cross-border settlements.

4. What Should Tether Do? Three Key Decision Points

Tether currently faces three challenging paths:

Whether Tether is willing to break its "offshore opacity" moat and truly move towards a sovereign regulatory system will determine its future trajectory.

5. The Direction of Stablecoins in the Asian Market Will Also Be Affected

Another significant "spillover effect" of the GENIUS Act is the acceleration of stablecoin regulatory policy development in other countries, particularly in the Asian market. Countries like South Korea, Singapore, and Japan have already begun to pay attention to the localization of stablecoins in recent years, and the U.S. move directly prompts the Asian market to reassess its reliance on stablecoins and begin to tighten the development path for local currency stablecoins.

For example, after the new president Lee Jae-myung took office in South Korea, he proposed to promote the development of a Korean won stablecoin to maintain financial sovereignty and prevent capital outflow. The regulatory restrictions on dollar stablecoins imposed by the GENIUS Act may instead accelerate the implementation of these localization attempts and further weaken the regional influence of offshore stablecoins like Tether.

6. Global Stablecoins Enter the "Compliance War" Phase

From a macro perspective, the GENIUS Act marks the entry of global stablecoin competition into a new era of "state power intervention." From the early days of decentralized spontaneous issuance to today's regulation-led, audit-supported, and central bank policy-guided environment, stablecoins are gradually transforming from a crypto product into a vehicle for geopolitical financial competition.

Whoever can obtain the institutional endorsement of the U.S. may gain an advantage in key areas such as international payments, reserve currencies, and financial settlements. Tether, once the "child of the free market," is being forced to make difficult choices in this institutional tide.

Conclusion:

The passage of the GENIUS Act is not only a significant step towards the modernization of U.S. financial regulation but also a drastic reshaping of the current dollar stablecoin landscape. If Tether cannot adapt to the regulatory wave, it will struggle to maintain its throne as the "king of stablecoins." The next global market leader may well be a new generation of stablecoins that are compliant, transparent, and robust.

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Original: “GENIUS Act Passed: A Crisis Moment for Dollar Stablecoin King Tether?”

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