US Senate Pushes to Apply US Regulations to Tether

Republican senators in the US Senate are moving to amend stablecoin regulation legislation to apply US regulations to overseas virtual asset (cryptocurrency) issuers, including Tether, the world's largest stablecoin issuer.

Recently, the Senate attempted a procedural vote to begin full discussions on the amended stablecoin regulation bill, known as the 'GENIUS Act,' but it was rejected due to opposition from the Democrats.

According to Unchained on the 9th (local time), the core of this amendment is the 'extraterritorial regulation' clause, which mandates that stablecoin issuers headquartered outside the US must comply with US laws if they provide services to users within the US. Tether, which has been effectively excluded from regulation, will be included under US oversight due to this clause.

The amendment also retains the relaxed reserve asset requirements from the previous version, which could actually benefit Tether, known for holding a large amount of US Treasury bonds.

Additionally, the amendment significantly expands the definition of virtual asset service providers to include developers, validator node operators, and self-custody wallet providers. This raises concerns that the decentralized finance (DeFi) ecosystem could be subject to the US Bank Secrecy Act and Anti-Money Laundering laws. Particularly, the clause that holds service providers legally responsible for using unapproved stablecoins could burden decentralized stablecoin projects.

The amendment also specifies that the Treasury Secretary has the authority to grant regulatory exemptions (Safe Harbor) for small or experimental projects. However, there is concern about the excessive expansion of administrative power, as the clause also allows the administration to take independent action in emergencies.