Pause on $20 billion funding plan: Is Tether heading toward compliance?

Author: Glendon, Techub News

Today, Bloomberg reported that Tether has pressed the “pause” button on its $20 billion fundraising plan. Previously, Tether ambitiously sought significant private equity financing, targeting a valuation of $500 billion, in an attempt to join the ranks of top private companies like OpenAI and SpaceX.

Why has Tether paused this fundraising plan? It is not due to a funding need, but rather a strategic adjustment initiated by Tether. In fact, Tether’s cash flow situation is good, with a net profit exceeding $10 billion last year and holding approximately $122 billion in U.S. Treasury bonds, making it the 17th largest holder of U.S. Treasuries in the world. The core consideration for Tether’s fundraising pause is to await the results of its first comprehensive financial audit, in response to market concerns regarding its long-standing lack of transparency. For a long time, potential investors and bankers have urged Tether to improve its financial transparency, and Tether’s CEO, Paolo Ardoino, has stated that completing a comprehensive audit is a top priority for the company, planned to be achieved by the end of 2026.

On March 24, Tether finally publicly announced that it has signed an agreement with one of the Big Four accounting firms to initiate its first complete independent financial statement audit. This audit is considered the largest inaugural audit in the history of financial markets, covering complex asset structures such as digital assets, traditional reserves, and tokenized liabilities, with a total scale exceeding $184 billion, marking Tether’s formal farewell to the “black box” operating model.

Because of this, Tether’s fundraising process may seem stalled, but in reality, it is the market and institutional demand that is pushing it toward a more compliant path. It is worth mentioning that the timing of Tether’s announcement to initiate its first comprehensive financial audit is quite coincidental, coinciding with the disclosure of the latest draft of the cryptocurrency market structure bill, the “CLARITY Act.”

The new provisions in this draft clearly delineate the regulatory boundaries of the stablecoin market: allowing platforms to offer reward programs (such as cash back and trading incentives) based on users’ stablecoin activities, but prohibiting the payment of returns solely for holding stablecoins, while also restricting any practices that equate such programs with bank deposits. This regulation accurately targets the core business model divergence in the stablecoin market, directly impacting Tether’s biggest rival, Circle.

While Circle does not directly pay interest to users, its business growth heavily relies on attracting funds through high interest payments (approximately 3.5% annualized) to users via partner platforms like Coinbase, thereby expanding the circulation of its stablecoin. Therefore, after the bill draft was exposed, the market reacted swiftly. Investors worried about the sustainability of its profit model, coupled with other negative factors, led to Circle’s stock price plummeting over 20%, setting a record for the largest single-day drop since the company went public in June 2025.

Undoubtedly, the latest draft’s content has a significant impact on Circle and Coinbase. If the “interest-bearing” model is entirely banned, it will inevitably weaken Coinbase users’ willingness to hold stablecoins, negatively affecting the overall circulation and market demand of USDC, thereby dragging down Circle’s minting volume and reserve interest income. Interestingly, according to sources, although Coinbase and some crypto companies expressed discomfort with the wording regarding stablecoin income in this week’s CLARITY Act, no one has explicitly stated opposition. This also means the proposal has a high likelihood of being passed.

However, some analysts believe the market’s reaction is excessive, as the bill does not prohibit Circle from earning interest on its reserves; it merely restricts the distribution of returns to users. In contrast, Tether’s situation is entirely different.

Objectively speaking, the latest draft of the U.S. CLARITY Act has a minimal impact on Tether’s USDT. On one hand, the core business model of USDT does not rely on “interest-bearing” practices. On the other hand, due to its offshore nature and fundamental misalignment with the global regulatory framework, USDT already faces multiple structural limitations on its path to compliance in the U.S. First, Tether’s legal registration is in El Salvador, while its operational core is located in Hong Kong. The U.S. GENIUS Act clearly places “foreign issuers” under a stricter regulatory framework, requiring their reserves to be 100% comprised of U.S. Treasuries and cash, and subject to oversight by the Office of the Comptroller of the Currency (OCC). While Tether has significantly increased its holdings of U.S. Treasuries, it still holds high-risk assets such as Bitcoin and gold, which contradicts the requirements of the Act.

Secondly, Tether lacks U.S. financial licenses, preventing it from directly accessing the banking system, and it can only hold U.S. Treasuries through third parties (such as Cantor Fitzgerald). In contrast, Circle has been approved by the OCC to establish a national digital currency bank. This means that Tether cannot be “natively compliant” like Circle; to meet U.S. regulatory requirements, it must undergo a thorough corporate restructuring.

Fortunately, Tether has already made preparations and launched the regulatory-compliant stablecoin USAT in the U.S. market at the beginning of this January. This stablecoin may become a potential beneficiary of the latest draft of the CLARITY Act, with the potential to be a key breakthrough in overcoming regulatory barriers.

USAT is issued by Tether’s newly established U.S. entity, with 100% of the reserve assets in cash and short-term U.S. Treasuries, fully complying with the CLARITY Act’s definition of “compliant stablecoins.” Like USDT, USAT does not provide “interest-bearing” services, naturally avoiding the limitations on passive income imposed by the Act, and it does not need to adjust its business model like Circle. This compliance-native positioning allows it to legally access the U.S. financial system, directly serving domestic institutional investors and retail users.

Earlier this month, Tether released the first reserve report for USAT, which was attested by Deloitte, marking the first time a Big Four accounting firm has provided an attestation report related to Tether’s stablecoin reserves. Now, with Tether initiating its first comprehensive audit, it will also provide new trust backing for USAT’s market promotion. Although the audit targets USDT’s reserves, once completed and made public, it will demonstrate Tether’s capability to meet international audit standards, alleviating institutional investors’ concerns about its “financial opacity.” On this basis, USAT may leverage Tether’s influence to provide a path for U.S. institutions to access the Tether ecosystem through federal regulatory tools.

It is important to note that the bill is still in draft form, and there is high uncertainty regarding whether it will pass and how specific provisions will be defined. From a long-term perspective, Circle has already gone public, is subject to annual audits by Deloitte, and publishes monthly reserve reports, maintaining a significant advantage in compliance and transparency. According to DeFiLlama data, as of the time of writing, USAT’s market capitalization is only $27.75 million, a vast difference compared to USDC. For USAT to directly compete with it will undoubtedly face many challenges.

Conclusion

Tether’s pause on its fundraising plan, initiation of a comprehensive audit, and the advancement of the latest draft of the CLARITY Act all signify that competition in the stablecoin market regarding “compliance” will become increasingly intense. Tether’s issuance of the USAT reserve report and the initiation of the USDT comprehensive audit also indicate its proactive embrace of compliance. However, Circle’s first-mover advantage in compliance and its large market base remain strong competitors in the compliance arena.

Future competition in the stablecoin market may no longer be a simple scale contest, but rather a comprehensive battle of transparency, compliance, and strategic resilience. The ongoing game between Tether and Circle will also become a microcosm of the compliance transformation in this sector.