Tether Seeks Legitimacy as It Hires White House’s Former Crypto Advisor
Tether, the issuer of the most popular dollar-pegged stablecoin in the world, USDT, has been doing well for more than a decade. Traders have been using it everywhere, on all platforms – from large exchanges to small dexes and other peer-to-peer markets. It became a widely adopted digital analogue of the US dollar in the cryptocurrency space.
However, over the past few years, things have begun to change radically. Regulators in the US and EU have begun to take a closer look at stablecoins, having stopped ignoring them. Now, there are detailed rules, demands for transparency. Licenses for using stablecoins are now given only to those issuers who follow the set of new regulatory rules. This has put Tether in a tight spot: it must either adapt or risk being reduced to a small player in the crypto space that continues to grow immensely fast. Its major rival, Circle and its USDC stablecoin, are in a much better position than Tether at the moment, with many licenses on their hands that USDT does not have.
Tether hires White House’s former crypto chief
Now, Tether seems to have fully realised the position they have got themselves into and is starting to signal they are eager to get out of it by all legal means possible. The first step towards this has been Tether’s recent hire of Bo Hines as a Strategy Advisor. Hines is a former executive director of the Crypto Council in Donald Trump’s administration.
While this may seem just a corporate announcement, in reality, his step shows that Tether might be finally preparing to enter politics. Hines knows how to navigate political circles and corridors of power. His official position in Tether, according to the press release on their website, is called “Strategic Advisor for Digital Assets and United States (U.S.) Strategy.” However, in reality, he will be building bridges between Tether and lawmakers, regulators, and high-tier financial institutions.
This is something Tether has been avoiding for years, while Circle has not. And now that Circle’s USDC is going legal both in the US and Europe, Tether strives to do the same. It has no choice and has to either catch up with Circle and get the same recognition or see its business and USDT adoption and usage gradually shrink.
New regulatory measures for stablecoins
The European Union has already introduced the MiCA (Markets in Crypto Assets Regulation) framework, taking a lead in regulating stablecoins. For any company that wants to issue stablecoins in Europe, MiCA presents strict conditions to fulfil to do that: licenses, clear and stable reserves, regular and transparent audits, constant supervision, etc. Circle had foreseen this pivot and took care to position USDC as a “clean” stablecoin. For this purpose, they set up a regulated entity in France to comply with MiCA. Now, as a result, USDC is allowed to be legally integrated across EU banks and the local financial system.
Tether has been fully realizing the situation only now, assessing it as both a threat and a chance for rapid growth. Unless it adjusts, USDC will replace USDT for Europe’s crypto exchanges and businesses. Many European exchanges have already suspended USDT trading over its lack of the necessary licenses and permits. Therefore, Tether is jumping for this opportunity to stay afloat and get itself an entry permit into the vast EU crypto and digital finance markets.
US lawmakers pass the Genius Act
In the US, a similar thing is taking place in terms of stablecoins’ future. After the Genius Act (Guiding and Establishing National Innovation for US Stablecoins Act) was voted into law earlier this summer, US lawmakers are currently discussing the implementation of a federal framework for stablecoins. This framework, when introduced, will force issuers to meet quite tough requirements.
In particular, it would force them to hold reserves in local state-backed assets like US Treasuries, have regular audits conducted, and be under strict control and supervision, pretty much like banks are these days.
And the hiring of Bo Hines screams about Tether knowing that it must change its strategy radically under the new circumstances. It now has no choice but to convince US regulators and lawmakers that it can be as transparent and law-abiding as Circle with its USDC.
Can Tether actually make it into the “white zone”?
The main question that not only Tether but all traders are asking themselves now is whether Tether will be able to succeed in this issue. On the one hand, USDT’s adoption around the world is unmatched. It is the most liquid stablecoin, and it has been integrated into crypto trading in every corner of the world where people trade crypto.
Its dominance in the space is something that would take a decade to achieve by USDC. On the other hand, for regulators, reputation is often more important than just adoption. And Tether has had fines from the New York Attorney General in the past, and also saw years of questions about Tether’s actual reserves. This all works against Tether’s potential recognition. Still, with the current pivot towards crypto approved by Donald Trump, this would probably be a small problem that Tether would manage to solve.
Anyway, this year, all eyes will be on Tether’s efforts to legalize USDT and keep up with Circle.
