Coinbase CEO Brian Armstrong has revealed that the exchange could be forced to delist USDT to comply with potential new regulations.

Armstrong was discussing the possible impact of new rules that could require stablecoin issuers to back their tokens entirely with U.S. Treasury bonds and undergo periodic audits to ensure transparency and financial integrity.

Shifting Regulatory Landscape

The executive was speaking to the Wall Street Journal on the sidelines of the World Economic Forum in Davos, where he stressed that it would be essential for his company to comply with the anticipated regulations even if it meant removing Tether from its platform.

Armstrong was also keen to point out that Coinbase would continue providing USDT services to customers to facilitate their off-ramping to other compliant assets. “We want to help them transition to a system that we think is more secure,” he said.

The exchange has already delisted several crypto assets from its European operations to comply with the Markets in Crypto Assets (MiCA) regulations. However, it has left the door open for possible relistings if the tokens meet the requirements at a “later date.”

One of the biggest criticisms leveled against Tether is that its quarterly attestations, published through BDO Italia, fall short of full audits. Additionally, observers argue that the reports may not meet the rigorous standards likely to be set by new U.S. legislation.

USDT currently dominates the stablecoin market, making up about 65% of the sector’s nearly $213 billion valuation. Its issuer holds about 80% of its reserves in Treasury bills, supplemented by assets such as gold and Bitcoin.

Towards the end of 2024, it added an extra $700 million worth of BTC to its reserves, bringing its total holdings of the cryptocurrency to $7.8 billion. This came even as its closest competitor, Circle, announced a partnership with Binance to help push the global adoption of USDC and whittle down USDT’s oversized market share.

Tether Finds a New Home

In April last year, Wyoming Senator Cynthia Lummis, together with her New York counterpart Kirsten Gillibrand, introduced the Payment Stablecoin Act, a bipartisan bill meant to create a framework for fiat-pegged cryptocurrencies.

If such legislation were to pass, it could force Tether to change its reserve policies and reporting methods to remain in the United States.

Interestingly, the crypto firm has already started shifting its focus away from the U.S. and European markets, positioning itself more in emerging economies. It recently announced plans to move operations to Bitcoin-friendly El Salvador, in what some see as a strategy to stay outside major regulatory zones.