Tether could encounter difficulties under proposed U.S. stablecoin regulations, potentially requiring the company to sell some of its current assets to meet compliance standards, according to a report from JPMorgan.

The GENIUS Act, recently introduced in the Senate, and the STABLE Act in the House of Representatives both seek to impose stricter regulations on stablecoins, particularly those with market capitalizations exceeding $10 billion. The Senate bill proposes federal regulation, while the STABLE Act focuses on state-level oversight. Both bills stipulate that stablecoins should be backed by high-quality, liquid assets like U.S. Treasury bonds.

Tether, the leading stablecoin issuer with a market share of approximately 60% and a market cap around $142 billion, is currently only 66% compliant with the STABLE Act’s reserve requirements and 83% compliant with the GENIUS Act’s guidelines, according to JPMorgan’s analysis. This could lead to Tether having to sell non-compliant assets such as bitcoin, precious metals, corporate debt, and loans, in favor of more compliant holdings like T-bills.

The bank also noted that Tether’s reserves have shown a declining compliance ratio over the past year as the supply of stablecoins increased. The proposed regulations would require Tether to swap non-compliant assets for assets that meet the new requirements.

Despite these challenges, a Tether spokesperson emphasized that the company is closely monitoring the situation and engaging with regulators. The spokesperson also pointed out that Tether holds over $20 billion in other liquid assets and generates substantial profits from U.S. Treasuries, making it well-positioned to adapt to the new regulations.

Tether’s CEO, Paolo Ardoino, dismissed the JPMorgan report in a tweet, suggesting that the bank’s analysts were simply upset that they did not own bitcoin. Additionally, the report raised concerns about how increased transparency and more frequent reserve audits under the new regulations could further complicate Tether’s operations.