As stablecoin regulations and innovations continue to reshape the digital asset landscape, two major developments have caught the industry’s attention. Tether, the issuer of USDt, has pushed back against claims from JPMorgan analysts suggesting it may need to sell Bitcoin to comply with proposed US stablecoin laws. Meanwhile, stablecoin company Plasma has secured $24 million in funding to build a Bitcoin-based blockchain designed for seamless USDt transactions.
Tether Fires Back at JPMorgan Analysts Over Proposed US Stablecoin Regulations
Tether, the operator of the USDt (USDT) stablecoin, has strongly criticized JPMorgan analysts for their claims that the company may need to sell some of its Bitcoin (BTC) holdings to comply with newly proposed US stablecoin regulations. The rebuttal comes amid increasing scrutiny over stablecoin reserve compositions and potential legal frameworks that could reshape the landscape for digital asset-backed financial instruments.
On Feb. 12, a JPMorgan analyst team led by strategist Nikolaos Panigirtzoglou released a report suggesting that Tether may be forced to offload some of its non-compliant assets, including Bitcoin and precious metals, to align with new US regulatory requirements. The analysts stated that the proposed stablecoin bills would necessitate reserve holdings in compliant assets such as US Treasury bills, insured deposits, and central bank reserves.
“This would imply sales of their non-compliant assets — such as precious metals, Bitcoin [...] — and purchases of compliant assets such as T-bills,” the JPMorgan report noted.
The suggestion that Tether might be required to liquidate part of its Bitcoin holdings to comply with these new standards was met with a sharp response from the company.
In a statement, a Tether spokesperson dismissed JPMorgan’s claims, asserting that the analysts fundamentally misunderstand both Bitcoin and Tether’s financial structure.
“They understand neither Bitcoin nor Tether,” the spokesperson remarked, while also emphasizing that the proposed US stablecoin laws remain in their early stages and are far from finalized.
The spokesperson went on to suggest that JPMorgan’s analysts might be acting out of frustration over missing out on previous Bitcoin buying opportunities.
“Those analysts at JPMorgan seem a bit jealous that they didn’t buy Bitcoin cheap, and it makes them salty,” the Tether representative stated. “They won’t have a cheap event to buy Bitcoin. No one feels sorry for them.”
The controversy stems from two major legislative proposals introduced in early February aimed at establishing a federal framework for stablecoins in the United States.
On Feb. 4, Senator Bill Hagerty introduced the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which seeks to set licensing and oversight requirements for stablecoin issuers. The bill is co-sponsored by prominent lawmakers, including Senate Banking Committee Chairman Tim Scott, Senator Kirsten Gillibrand, and Senator Cynthia Lummis.
Shortly after, on Feb. 6, House Financial Services Committee Chairman French Hill and Representative Bryan Steil released a discussion draft for the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act. The draft reportedly aligns with the GENIUS Act and is intended to guide stablecoin policy in the House of Representatives.
While both bills share similar regulatory objectives, the STABLE Act is viewed as imposing stricter reserve requirements. According to JPMorgan’s report, stablecoin issuers under the STABLE Act would only be permitted to hold reserves in:
Insured deposits
US Treasury bills
Short-term Treasury repurchase agreements
Central bank reserves
In contrast, the GENIUS Act would allow additional financial instruments, such as money market funds and reverse repurchase agreements, broadening the scope of acceptable reserve assets.
JPMorgan’s analysts argued that these new requirements could pose challenges for Tether, which remains the dominant stablecoin issuer with a nearly 60% market share. The report estimated that under the proposed regulations, only 66% of Tether’s reserves would be compliant with the STABLE Act, while 83% would meet the criteria under the GENIUS Act.
As a result, the analysts concluded that Tether would likely need to restructure its asset holdings, potentially selling off portions of its Bitcoin and precious metal reserves to meet compliance requirements.
Despite JPMorgan’s analysis, Tether maintains that it is well-positioned to navigate any regulatory changes without major disruptions.
“Tether is closely monitoring the evolution of the different US stablecoin bills and also actively engaging with local regulators,” the company stated.
The stablecoin issuer also pointed out that its group equity exceeds $20 billion in other liquid assets and that it generates more than $1.2 billion in quarterly profits through its holdings in US Treasuries. This, Tether argues, provides it with ample financial flexibility to adapt to any new regulatory mandates without having to liquidate core assets such as Bitcoin.
Regulatory Landscape for Stablecoins Intensifies
The debate between Tether and JPMorgan analysts shows the broader regulatory uncertainty surrounding stablecoins. US lawmakers have been attempting to establish clear guidelines for the sector, particularly following the collapse of algorithmic stablecoin TerraUSD (UST) in 2022 and heightened concerns over systemic risks in the crypto market.
Tether has long faced scrutiny over its reserve composition, with regulators and critics often questioning the transparency of its asset backing. While the company has taken steps in recent years to improve disclosure and audit practices, concerns persist about the extent to which its reserves align with emerging regulatory standards.
If stricter regulations are implemented, Tether’s ability to maintain its current reserve structure may come under pressure. However, the company’s strong stance against JPMorgan’s claims suggests it is confident in its ability to adapt without making drastic changes to its Bitcoin holdings.
Moreover, Tether’s financial strength—bolstered by significant profits and liquidity—could provide the necessary buffer to adjust its asset allocations while still maintaining market stability.
For now, it remains unclear which of the proposed bills will move forward or what final regulatory requirements will look like. However, one thing is certain: as the largest stablecoin issuer in the industry, Tether will remain a focal point of regulatory discussions, and its next moves will be closely watched by both policymakers and market participants.
Plasma Raises $24 Million to Develop a Bitcoin-Based Blockchain for Tether’s USDt
In other news, the stablecoin sector is heating up with a major new development as Plasma secures $24 million in funding to build a next-generation blockchain tailored for Tether’s USDt, the world’s most widely used stablecoin. The funding round, reported by Fortune on Feb. 13, was led by Framework Ventures, with key participation from Bitfinex, Peter Thiel, and Tether CEO Paolo Ardoino.
Plasma’s ambitious project aims to revolutionize stablecoin trading and transactions by leveraging the Bitcoin network while offering zero-fee USDt transactions—a game-changing move that could significantly alter the stablecoin landscape.
Plasma co-founder Paul Faecks emphasized that the new blockchain would be Bitcoin-based, setting it apart from traditional USDt integrations on Ethereum, Tron, and other networks.
While USDt is already available across multiple blockchains, Plasma is focused exclusively on stablecoin trading, allowing for fast and efficient settlements. This specialization could give it an edge over existing networks that juggle multiple asset types and functionalities.
One of Plasma’s biggest value propositions is its commitment to zero-fee transactions for users moving USDt. However, the project is not entirely free of charges—service providers such as Curve and Aave will be charged for interacting with the Plasma network. This approach allows end-users to benefit from frictionless transactions while still maintaining a sustainable revenue model.
Plasma’s latest funding round and development plans align with Tether’s broader vision of cross-chain interoperability and settlement improvements.
Tether has recently expanded its operations with multiple cross-chain initiatives, including:
Integration with LayerZero, allowing The Open Network (TON) to connect with USDt’s ecosystem.
Selection of Arbitrum as the infrastructure provider for USDT0, its cross-chain dollar stablecoin.
Bitfinex and Tether have yet to officially comment on the Plasma development, but their involvement in the funding round signals a strong vote of confidence in the project’s vision.
Tether’s USDt remains the largest stablecoin by market capitalization, but the competitive landscape is rapidly shifting.
Circle’s USDC has seen a resurgence, doubling its supply since November 2023 to over $56 billion, positioning itself as Tether’s primary rival.
The Global Dollar Network Consortium—which includes Kraken, Paxos, and Robinhood—is actively promoting Paxos’ USDG stablecoin, which launched in November.
Crypto.com is preparing to launch its own native stablecoin in 2024, adding further competition to the market.
In addition, the stablecoin payment sector is growing, with former Binance.US CEO Brian Shroder launching 1Money, a Layer-1 blockchain designed to support multi-currency stablecoins.
Plasma’s Bitcoin-based approach introduces a new dynamic to the stablecoin race. Unlike Ethereum-based stablecoins, which face congestion and high gas fees, Plasma’s integration with Bitcoin could provide a more stable and cost-efficient alternative, particularly for large-scale transactions and institutional use cases.
The expansion of stablecoins is occurring as regulators increasingly acknowledge their importance in financial markets.
In a recent US House Subcommittee hearing on Digital Assets, Financial Technology, and Artificial Intelligence, former Commodity Futures Trading Commission (CFTC) Chair Timothy Massad described stablecoins as “the most useful application of blockchain technology to date.”
What Plasma’s Development Means for the Stablecoin Market
Plasma’s new Bitcoin-based blockchain for USDt could have far-reaching implications for the stablecoin industry. If successful, it may:
Reduce transaction costs across the stablecoin market by offering fee-free transfers for users.
Increase adoption of USDt by making it easier and cheaper to use.
Challenge Ethereum’s dominance in the stablecoin sector by offering an alternative infrastructure for fast and cost-effective transactions.
Drive institutional interest in stablecoins by providing a secure and scalable settlement layer on Bitcoin.
However, challenges remain. Scalability and security concerns for a Bitcoin-based stablecoin settlement network will need to be addressed. Additionally, regulatory uncertainty surrounding stablecoins, particularly in the US and EU, could impact adoption rates.
Plasma’s $24 million funding round signals growing investment in next-generation stablecoin infrastructure, with major backers like Peter Thiel, Bitfinex, and Paolo Ardoino showing strong confidence in its success. As the stablecoin industry evolves, Plasma’s Bitcoin-based approach could set a new standard for fast, cost-effective, and scalable USDt transactions.
With Circle, Paxos, Crypto.com, and other competitors ramping up their stablecoin efforts, 2024 is shaping up to be a pivotal year in the stablecoin wars. Whether Plasma can deliver on its promise of zero-fee USDt transactions remains to be seen, but its backing and strategic vision make it one of the most exciting projects in the crypto space today.
