The JPMorgan research team reiterated in the report that due to the arrival of stablecoin regulations, Tether needs to be more transparent and more compliant with standards such as KYC/AML, which will significantly weaken its appeal.

Stablecoin regulations are coming, and Tether faces challenges

According to CoinDesk, JPMorgan Chase (JPM) said in a research note released on Thursday that its long-term dominance is under threat due to the impending regulations on stablecoins in the United States.

As previously reported, in a closed-door meeting of the House Financial Services Committee, U.S. Federal Reserve (FED) Chairman Jerome Powell revealed that he was optimistic about reaching a consensus on stablecoin regulation. He allegedly said:

“We are close to reaching an agreement on stablecoin legislation.”

("Pass the stablecoin bill quickly!" Federal Reserve Chairman Powell urgently regulates stablecoins and asks Congress to speed up)

The United States still has ways to sanction offshore entities

Although Tether is not registered in the United States, JPMorgan Chase’s research team led by Nikolaos Panigirtzoglou noted that regulators can still exert a certain degree of control over its offshore entities through the U.S. Office of Foreign Assets Control (OFAC).

The report cited the connection with Tornado Cash as an example. The U.S. Treasury Department still had the means to place the encryption mixer Tornado Cash on the sanctions blacklist in August 2022 and accuse it of assisting money laundering.

The report states:

While direct legal action against offshore entities and decentralized companies is complex, indirect measures and international collaborations could hinder the use of Tether.

(Tornado Cash developers will be detained for another three months, during which public hearings will be held)

US regulatory pressure will significantly reduce the attractiveness of USDT adoption

The report reiterates that due to the arrival of stablecoin regulations, Tether will need to be more transparent and more compliant with standards such as KYC/AML, which will significantly weaken its appeal.

In particular, stablecoin regulations will be globally coordinated for the G20 through the Financial Stability Board (FSB), further restricting Tether adoption.

Although Tether has recently committed to releasing financial information, the report still believes that this information is not enough to eliminate market doubts.

(Tether’s excess reserves reached US$5.4 billion in the fourth quarter, and it made a huge profit of US$6.2 billion in 2023)

And this isn’t the first time JPMorgan’s analysis team has criticized Tether.

(JPMorgan Chase: Tether’s dominance in stablecoins is worrying)

This article JPMorgan Chase: Stable currency law will be released, the United States can sanction offshore entities, Tether faces severe challenges, first appeared in Chain News ABMedia.