The Stable Act could mean the end of Tether.
The US government wants tighter controls on stablecoins.
Tether could be replaced by a regulated crypto-dollar.
Unregulated stablecoins such as Tether face increasing regulatory pressure from the US government.
A new US bill called the Stable Act is causing anxiety in the crypto community. The introduction of this law could effectively put an end to billions of dollars in transactions and set the industry back several years.
The law, as reported by BeInCrypto , calls for banking licenses for stablecoin issuers such as Tether.
It doesn’t end there. The bill proposes additional requirements for Federal Reserve reporting. It also offers issuance approval in addition to constant checks, and an insurance policy to cover assets.
Another proposal may require stablecoin issuers to store their reserves directly with the U.S. Federal Reserve. This puts them under the control of the central bank and significantly limits their open use.
An apocalyptic law for Tether and crypto
A report from Dragonfly Research offers an in-depth analysis of the current use of stablecoin . He concludes that if the bill passes, it could spell the end of Tether:
Make no mistake: the day Tether is slain it will prove to be apocalyptic .
Tether is by far the largest and most widely used stablecoin. Its supply has grown 410% this year alone, from $ 4.1 billion in market cap in early January to $ 20.9 billion today, according to the Tether Transparency Report .
Tether, or the “cryptodollar” as the report researcher calls it, has revolutionized the industry over the past two years. He opened up huge trading gateways with massive liquidity that was not possible using fiat.
The USDT has been a liferaft for many citizens in countries with hyperinflation or tight currency controls. It also helped fuel the rise of DeFi alongside Ethereum.
However, several US agencies and prosecutors are investigating Tether. The company has so far produced very few defenses or audits.
Tether cannot support its monumental growth, which is not sustainable, the research added. The authors say the day of his demise will bring down the entire industry.
Crypto markets will collapse, exchanges will be in disarray, millions of crypto traders will likely have their assets frozen, and prices will drop everywhere.
The future of stablecoins
Currently, the “Stable Act” is only a proposal. It is the subject of much criticism from industry leaders and entrepreneurs, for example. They say the proposal sends the United States back to a dark age in terms of innovation and digitization.
However, a recent statement from the Presidential Task Force bodes ill for this crypto segment. The statement suggests that all stablecoin holders should be subject to KYC (know your customer) requirements, which indicates that stablecoins are still in their sights.
Tether may not be the future of the digital dollar. First, a regulated stablecoin that becomes the de facto standard is a likely replacement. Then there will inevitably be more audits and identity checks by governments, banks and tax authorities. If so, the freedoms we have today with the digital money movement could be a thing of the past.