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The stablecoin market has reached a new record in 2025, with the total market capitalization now standing at $224 billion, surpassing the previous peak of $180 billion in 2022.
This growth is attributed to the expansion of the overall cryptocurrency market, as stablecoins are primarily used as collateral within the crypto ecosystem. The increase also reflects the potential impact of stablecoin regulations.
In Europe, regulatory clarity has been established with the Markets in Crypto-Assets (MiCA) regulation in effect since the beginning of the year. Meanwhile, in the United States, Congress is expected to pass stablecoin legislation later this year.
Two proposed bills are under consideration: the "STABLE Act" from the House and the "GENIUS Act" from the Senate. These bills aim to establish guidelines for stablecoin issuers, including licensing requirements, operational risk management, and a mandate for 1:1 reserve backing.
According to JPMorgan, the proposed U.S. stablecoin bills share several elements but also have key differences. The Senate’s GENIUS Act requires federal regulation for large stablecoins with a market cap over $10 billion and allows for state regulation if it aligns with federal standards. The House’s STABLE Act permits state regulation without conditions.
Additionally, the STABLE Act has stricter reserve requirements, only allowing insured deposits, U.S. Treasury bills, short-term treasury repos, and central bank reserves, while the Senate bill includes additional instruments like money market funds and reverse repos. Moreover, the Senate bill gives priority to stablecoin holders in issuer bankruptcy cases.
Tether, the largest stablecoin issuer, commanding nearly 60% of the market, could face challenges under these proposed regulations. Both bills require high-quality and liquid assets as reserves. Current Tether reserves are only 66% compliant under the STABLE Act and 83% compliant under the GENIUS Act. These figures indicate a declining compliance ratio since mid-last year, as the stablecoin supply has surged.
Tether may need to replace its non-compliant assets with compliant ones, which would involve selling assets such as precious metals, bitcoin, corporate paper, secured loans, and other investments and buying compliant assets like U.S. Treasury bills.
The proposed U.S. regulations, which call for increased transparency and more frequent reserve audits, pose additional challenges for Tether. The company has already been delisted from several European crypto exchanges for failing to comply with MiCA regulations, which require large stablecoin issuers to keep 60% of their reserves in EU banks.
While Tether’s non-compliance in Europe has had limited impact due to its small market share there, its significant market share in the U.S. means that American regulations could present a more substantial challenge for the company.
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