Tether's Dual Stablecoin Strategy: USAT as a Compliance Facade for USDT

In January 2026, Tether took what appeared to be a conciliatory step: it launched USAT, a U.S.-based stablecoin designed to comply with the GENIUS Act’s federal regulations, issued through a U.S.-chartered bank and overseen by a custodian approved by Washington. After years of operating largely offshore and away from U.S. regulation, the world’s largest stablecoin company now appears to be stepping into the regulatory fold.

Tether’s newly launched USAT is a “moat”: a U.S. subsidiary designed to comply with the GENIUS Act, specifically intended to keep the $183 billion offshore USDT permanently outside the reach of U.S. regulation. (Image source: Silas Stein/picture alliance via Getty Images)

But appearances can be misleading. USAT is best understood as a firewall—a compliant subsidiary whose very existence allows Tether’s core product to remain permanently outside U.S. regulatory oversight.

Learn what USAT is: issued by Anchorage Digital Bank, a federally chartered U.S. institution, with Cantor Fitzgerald serving as the designated reserve custodian, and a CEO recruited from the White House’s crypto role. It is a clean, domestic product fully compliant with the federal framework, and in early 2026, it received a reserve attestation reviewed by Deloitte, one of the Big Four audit firms.

The original Tether USD (USDT), however, lacks all these characteristics. It is issued offshore, has a circulating supply exceeding $183 billion, and holds assets prohibited under the U.S. payment stablecoin regime. These two stablecoins provide the same company with two distinct regulatory identities: USAT serves as Tether’s front to U.S. regulators, while USDT remains its true identity elsewhere globally. The company has structured its system so that the two will never need to merge.

This split exists because the current structure of USDT cannot meet the compliance requirements of the GENIUS Act. The law requires that payment stablecoins be backed 1:1 by high-quality, highly liquid assets—primarily cash, short-term U.S. Treasuries, government money market funds, and similar instruments—and mandates monthly reserve reports audited by registered accounting firms.

Tether’s own Q1 2026 data clearly illustrates the barrier. The company reported total assets of approximately $191.8 billion, corresponding to its issued tokens, with its reserve portfolio including about $20 billion in gold and billions in Bitcoin. These held assets have generated extremely high profits for Tether—$1.04 billion in profit for the quarter and over $10 billion for the full year of 2025. However, these are precisely the assets prohibited from being held by the GENIUS compliant payment stablecoin.

Bringing USDT into compliance means dismantling its reserve structure that generates high returns—a cost Tether has shown no willingness to pay so far.

It’s easy to view the dual-currency structure as Washington’s problem solved—now there’s a compliant USD token serving the regulated market. But this interpretation overlooks what truly matters about USDT.

The focus of USDT lies far beyond the United States, in economies around the world facing dollar shortages. In Argentina, Turkey, Nigeria, Vietnam, and numerous other economies with weak local currencies and limited access to physical dollars, USDT serves as a store of value and settlement channel, often more reliable than local banking systems. With a circulating supply exceeding $183 billion, this token is, by any reasonable definition, a systemically important instrument in global dollar usage.

The structure built by Tether keeps this tool permanently outside U.S. oversight. USAT will be subject to review, verification, and supervision, while USDT—the token that circulates dollars in fragile economies—will not, because it doesn’t need to. Its users are outside the U.S., and its issuance is offshore; the GENIUS framework targets U.S. service providers, not foreign holders. For U.S. policymakers, this is an awkward passive situation: the penetration of the dollar into developing countries is increasingly facilitated by a private token that the U.S. government cannot regulate or easily audit, and the design of the GENIUS transition provides Tether with a justifiable reason to remain offshore.

Understanding what it would take to include USDT in the GENIUS system reveals the structure of a dual-currency model. A compliant USDT must sell its gold and Bitcoin holdings and convert the proceeds into cash and short-term Treasury securities; it must undergo monthly audits by a registered accounting firm and be subject to oversight by U.S. regulatory authorities. In this process, it transforms from a high-yield portfolio diversified across multiple asset classes into a narrow money market structure earning only Treasury interest rates.

The financial cost of this transition is enormous, and the strategic cost is even greater. Tether’s distance from the U.S. banking and regulatory system is precisely what makes it valuable to its core users—individuals and businesses operating outside the bounds of underfunctioning financial systems. A USDT subject to U.S. regulation would be an entirely different product with a changed value proposition, likely losing its original offshore base. Faced with this prospect, Tether chose to build a separate compliant token—the only way to preserve both businesses.

Tether does not describe the situation in the manner I outlined above. Its official announcement states that USDT "continues to operate globally" while "making progress toward compliance with the GENIUS Act." This is the company's official position and deserves fair citation and honest consideration.

However, when compared to the actual structure, this claim does not hold. "Moving toward compliance" is fundamentally different from creating a standalone compliant token, and Tether chose the latter. If USDT were genuinely on a path to GENIUS compliance, USAT would be redundant—no company would invest in securing bank relationships for a second dollar token, recruit a CEO with Washington experience, and commission Big Four audits to verify it, while simultaneously expecting its first token to achieve compliance on its own. The very effort invested in USAT demonstrates the company’s expectation: USDT will remain offshore.

This arrangement is time-limited. Under the GENIUS framework, U.S. digital asset service providers are subject to a transition period, after which they may only offer stablecoins permitted under federal regulations. In practice, by mid-2028, U.S. exchanges and custodians will be required to delist any dollar-denominated tokens not approved by GENIUS.

If USDT is still not approved by then, the U.S. platform will delist—this is precisely the moment the dual-currency strategy was designed to address: USAT will inherit the U.S. market, absorb compliant traffic, and bear the regulatory burden; while USDT retains its offshore foundation—including users in emerging markets, economies facing dollar shortages, trading pairs outside U.S. jurisdiction, and its profit-generating reserve structure. Tether will not lose anything it cannot afford, as USAT was always intended from the start to handle the compliance portion of the business.

A natural reaction is that U.S. authorities could force USDT to comply or cut off its channels. But the actual leverage is far less than imagined. Tether operates as an offshore company, and its issuance does not rely on the U.S. banking system as USDT does; most of its users are foreign citizens, placing them beyond the practical reach of U.S. consumer regulation. GENIUS’s transformation has given Washington a tool to remove USDT from U.S.-regulated platforms, but it regulates the U.S. market, not the global circulation of the coin.

Removing USDT from U.S. exchanges, if anything, further reinforces Tether’s designed separation: compliant tokens remain in regulated domestic markets, while offshore tokens serve a larger and faster-growing international base. Enforcement actions targeting the U.S. market cannot bring offshore tokens into compliance, and Tether has already structured itself to avoid such compliance.

The impact of the dual-currency structure extends beyond stablecoin policy to the U.S. government debt market. Tether’s reserves are heavily concentrated in U.S. Treasuries, and the company has claimed in its USAT launch announcement to be the 17th largest holder of U.S. Treasuries globally, surpassing national holders such as Germany and South Korea. The majority of this exposure is backed by the offshore stablecoin USDT.

A private offshore company has become a significant source of demand for short-term U.S. government debt, with this demand growing alongside USDT. Washington benefits from these purchases because every dollar of USDT in circulation effectively equates to an additional dollar lent to the Treasury. However, Washington has no oversight relationship with this lending entity.

The firewall design locks in this arrangement. As USDT continues to expand offshore, its footprint in government debt grows in tandem, making the U.S. government increasingly reliant on a demand it cannot regulate. USAT’s compliant reserves will be held within a supervised system, while USDT’s much larger reserves remain outside it. The country whose debt is heavily held by Tether, through the design of the GENIUS transition, has given Tether a justifiable reason to keep an even larger reserve pool beyond regulatory oversight.

This is not an accusation that Tether has violated any laws. Operating a compliant subsidiary in the United States while maintaining an offshore parent company is a common and legal corporate structure across many industries. Regulators and the media should stop describing USAT as “Tether going compliant,” as this framing completely inverts the strategy.

The true purpose of USAT is to allow the world's most systemically important stablecoin to remain outside the U.S. regulatory framework at any time Tether chooses, while leaving a smaller, cleaner "sibling coin" to bear the burden of scrutiny. The real question in 2028 is not whether Tether will comply—it has already designed its answer. Rather, it is this: what does it mean that the largest dollar-denominated instrument operating outside the banking system has been intentionally and structurally placed beyond the regulatory reach of its issuing currency’s home country?

Article by Zennon Kapron, Forbes; Translated by AididiaoJP, Foresight News