• US legislators may categorize stablecoins as securities.
  • If USDT is considered a security, the cryptocurrency industry will be in trouble.

The US regulators are considering new legislation that will define stablecoins as security. If the bill is adopted, Tether might face a lawsuit from the SEC.

A Twitter user @RealWillyBot brought to notice that five days ago, the Justice Department ruled that a stablecoin can "constitute a security."

Depending on its design and other factors, the stablecoin may constitute a security, commodity, or a derivative subject to the US federal securities, commodity, or/and derivatives laws.

Also, if a stablecoin is widely used for retail payments in the United States, additional safeguards may be required to deal with the risks. The issuer will have to implement robust risk management systems, ensuring a 1:1 reserve ratio and adequate financial resources to absorb losses, and meet liquidity needs, provide customer protection, and comply with all AML requirements. 

If the proposal becomes a law, and USDT, the largest and the most popular stablecoin, is qualified as a security, it will come within the purview of the federal securities laws. In this case, the US Securities and Exchange Commission might go after Tether for offering unregistered securities.

USDT will suffer XRP's fate

The story with the SEC's lawsuit against Ripple has clearly demonstrated what can happen to the coin when the regulator goes after it. However, when it comes to Tether, the outcome may be catastrophic, as it is the backbone of the whole cryptocurrency market with an average daily transaction volume of over $77 billion. Actually, it is the most actively traded coin in the industry, used by virtually all trading platforms and cryptocurrency service providers. 

According to Dragonfly Capital managing partner Haseeb Qureshi, the legal action against Tether would be a disaster for the industry. 

Make no mistake: the day that Tether gets taken down will be apocalyptic. Crypto markets will seize, exchanges will be thrown into disarray, millions of crypto traders will likely have their assets frozen, and prices everywhere will plummet. It will be pronounced yet another death for Bitcoin," he said.

As FXStreet previously reported, Tether may be too big to fail as the industry has become too dependant on USDT. However, according to Haseeb Qureshi, Tether's woes won't kill the industry but rather make it stronger.

But, as it always does, crypto will eventually recover. And when the dust settles, we'll enter the third stage of crypto money", he said.

The expert believes that the digital dollar may come to replace USDT. The cryptocurrency markets will quickly adapt to a new standard to be able to get back to business, meaning that the authorities will successfully complete the mission of regaining control over the parallel financial system. 


Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Recommended content


Recommended Content

Editors’ Picks

Crypto Today: Traders discuss Solana futures and Ethereum Hoodi update as Bitcoin price stalls at $83,000

Crypto Today: Traders discuss Solana futures and Ethereum Hoodi update as Bitcoin price stalls at $83,000

Amid a 2% decrease in market capitalization, crypto trading volume surges 42% to $87.2 billion in the last 24 hours, signalling active capital rotation. Bitcoin price stagnates below $85,000 as Gold enters a record rally to $3,000 ahead of the US Fed rate decision.

More Cryptocurrencies News
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC, ETH, XRP gain as MicroStrategy buys $10.7 million BTC

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC, ETH, XRP gain as MicroStrategy buys $10.7 million BTC

Bitcoin (BTC) daily price chart shows signs of recovery in the largest cryptocurrency. Strategy, one of the largest corporate holders of Bitcoin, acquired another 130 BTC last week, according to an announcement on Monday. 

More Cryptocurrencies News
Top Formula 1 crypto sponsors rally, racing fans gain from Binance Coin, OKB, ApeCoin and Crypto.com

Top Formula 1 crypto sponsors rally, racing fans gain from Binance Coin, OKB, ApeCoin and Crypto.com

The 2025 Formula 1 season kicked off in Australia last week with a lineup of crypto sponsors for half of the teams. Racing giants are powered by sponsors like crypto exchanges Binance, OKX, ApeCoin, and Crypto.com, among other NFT and trading platforms.  

More Cryptocurrencies News
SEC pumps brakes on altcoin ETFs, institutional interest remains

SEC pumps brakes on altcoin ETFs, institutional interest remains

The US SEC postponed its decisions on several spot altcoin ETF applications this week, including those for Litecoin, XRP and Solana. A K33 Research report shows there is consensus but the agency is waiting the confirmation of Trump’s nominee for SEC Chair. 

More Cryptocurrencies News
Bitcoin: BTC at risk of $75,000 reversal as Trump’s trade war overshadows US easing inflation

Bitcoin: BTC at risk of $75,000 reversal as Trump’s trade war overshadows US easing inflation

Bitcoin price remained constrained within a tight 8% channel between $76,000 and $84,472 this week. With conflicting market catalysts preventing prolonged directional swings, here are key factors that moved BTC prices this week, as well as key indicators to watch in the weeks ahead. 

Read full analysis
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

BTC

ETH

XRP