The timing of this reduction coincides with significant regulatory shifts in both the United States and the European Union. Under the U.S. GENIUS Act, stablecoin issuers with more than $50 billion in tokens outstanding are required to file audited annual financial statements rather than the lighter quarterly attestations previously used. With approximately $184 billion in USDT in circulation, Tether exceeds this threshold by more than three times. The Congressional Research Service confirmed in an October 2 briefing that these reports must be certified by executives and examined by registered public accounting firms.
Tether has historically relied on quarterly attestations under the ISAE 3000 standard, a point-in-time verification that does not test internal controls over a full fiscal year or verify every transaction. In contrast, its primary competitor, Circle, which has approximately $74.3 billion in USDC in circulation, publishes monthly attestations examined by Deloitte & Touche. The distinction between an attestation and a full audit is becoming a critical compliance issue. A full audit, now mandated for large issuers under the GENIUS Act, involves testing samples of transactions and examining controls, carrying greater professional liability and legal weight.
Disputes remain regarding the current state of Tether’s auditing processes. While some October reporting suggested that KPMG US completed a full independent audit of Tether’s fiscal 2025 statements in August 2026, citing a $6.814 billion surplus and $141 billion in U.S. Treasuries, other contemporaneous reports state that Tether had not completed a Big Four audit as of October 2026. Until a signed report is published confirming such an audit, the claim remains unresolved. What is not in dispute is the transparency gap between Tether’s quarterly snapshots and Circle’s monthly, Deloitte-examined reports.
Regulatory pressure is also mounting from Europe. The European Securities and Markets Authority has set a January 8, 2027, deadline tied to Tether’s status under the EU’s Markets in Crypto-Assets (MiCA) framework. USDT has not yet secured authorization as an electronic-money token in the bloc, creating a countdown for European exchanges and wallet providers regarding whether they can continue offering the token to EU customers in its current form.
Compounding these financial and regulatory challenges, a Senate investigation has found rampant use of Tether’s stablecoin by the Iranian regime to facilitate funding. The report highlights concerns over the stablecoin’s role in bypassing traditional financial sanctions, adding a geopolitical dimension to the compliance risks facing the issuer.
Amidst these developments, Tether is also altering its technical infrastructure. In October 2026, the company is relaunching USDT on the Bitcoin network, a move not undertaken in over a decade. This integration is facilitated by Utexo, a Tether-backed company, using the RGB protocol. Unlike the original 2014 launch on the Omni protocol, the RGB protocol keeps most transaction data off Bitcoin’s main chain, enabling private transfers and direct exchanges between BTC and USDT. However, this design implies minimal fee revenue for Bitcoin miners, as the majority of data does not require on-chain recording. Additionally, a USDT balance on Bitcoin represents a dollar claim on Tether rather than an exposure to Bitcoin’s price, meaning the relaunch does not inherently increase demand for the underlying cryptocurrency.
Market participants now await Tether’s first full audit under the new U.S. standards and its ability to secure MiCA authorization in the EU before the January 2027 deadline. The intersection of shrinking reserves, heightened audit requirements, and alleged geopolitical misuse places Tether at a pivotal juncture in the evolution of the stablecoin industry.
