New, ridiculous rules from major jurisdictions, particularly the US, are restructuring the global digital asset market and presenting a major challenge to Tether’s USDT, the largest stubcoin with a market capitalization of over $160 billion.
A recent research report from Zhou Hao, chief economist at multi-billion dollar financial services company Guotai Junan International, suggests that Tether could face a “hard challenge” as the US moves towards a compliant Stablecoin regulatory framework.
Zhou argues that Tether’s market share and influence, according to the Chinese translation, is “inevitably erode by submissive Stablecoins.”
“However, in the regulatory gray zone, the benefits of network effects and initial movements could still maintain a considerable ‘offshore survival space’ within the areas where FIAT currency has failed, and within the core liquidity layer of ecosystems from cryptocurrencies,” Zhou added.
According to Zhou, in countries experiencing currency instability and high inflation, such as Nigeria, Tether remains a widely used tool to store value, promote cross-border payments and pay wages.
As global interest in “de-cooperative” grows, the report suggests that non-dollar stubcoins can address local demands and find “new opportunities” by linking to use cases such as infrastructure and remittances, Zhou writes.
Tether has not yet responded to Defiant’s request for comment.
Mounting pressure
Tether has been under pressure for some time as new EU and US rules restructure the Stablecoin market.
The European MICA framework is currently essentially required by Stablecoin issuers to hold reserves in EU-controlled banks, undergo audits and meet strict governance standards.
Meanwhile, in the US, the Genius Act is seeking full backup support, transparent audits and chain freezing capabilities for Stablecoins, a requirement that could technically challenge Tether’s business model.
Guotai Junan International is a Hong Kong-based subsidiary of Guotai Junan Securities, one of China’s largest and oldest brokerage companies, with a market capitalization of around $44 billion, making it the 500th most valuable company in the world.
As Defiant reported in June, Guotai Junan International became the first Chinese-backed securities company approved by the Hong Kong Securities and Futures Commission, which provides full-scope virtual asset trading and advisory services.
