How Will Tether’s Consequences Affect Bitcoin?

A Glance

• You can also find out more about the following: GENIUS Act The U.S. provided a legal framework for private stablecoins while delaying a CBDC issued by the government.
• Tether (USDT) has achieved record profits, and is now one of the most profitable currencies. largest private holders of U.S. Treasuries.
• Co-operation between the firm and authorities shows that it is committed to ensuring compliance with laws. stablecoins function as compliance railsThey are not alternatives.
• Tether is now the ecosystem of choice for many Bitcoin supporters, who unintentionally help extend the system that they are supposed to be fighting.

Bitcoin’s Quiet Compromise

What is the best way to get in touch with you? GENIUS Act became law on 18 July 2025The crypto industry welcomed the Act as the end to regulatory uncertainty. The Act mandates that licensed stablecoin issues hold liquid reserves, such as U.S. Treasury bills and cash, make monthly disclosures and submit to federal or state supervision. Congress also halted the development of a digital currency for the federal central bank.

Critics called this a silent federalization of money. Supporters considered it an innovation victory. It is no longer necessary for the United States to create its own digital dollars. The United States has delegated this function to private companies that operate under supervision. Bitcoiners, who were a movement built on the idea of sound money that was decentralized, should be concerned about this shift.

Tether’s private Empire

It is the biggest beneficiaries of this framework that will be Tether Limited is the only stablecoin provider whose USDT token dominates worldwide supply. The Q2 2025 attestation, Tether Limited reported a net profit of approximately $4.9 billion and total exposure to U.S. Treasuries exceeding $127 billion. Treasury Bills and reverse Repo Holdings The balance sheet revealed nearly $120 billion in TreasuriesTether is now one of the largest holders of U.S. Government debt in private hands.

Custody of those assets rests with Cantor FitzgeraldThe Wall Street company led by Howard Lutnick. Lutnick has publicly defended Tether’s reserve, affirming Cantor’s role as custodian and reiterating that Cantor holds no equity interest in the business. 

It is more difficult to connect now: Lutnick was later nominated for a senior White House economic position Overseeing aspects of financial and trade regulation. This appointment puts a federal politician in close proximity to one the biggest private holders of U.S. Treasury debt, and a key custodian of a dollar-backed token whose profit depends on U.S. Treasuries. This is a very uncomfortable situation. Tether’s business relationship has become more complicated, and it is now a possible conflict of interests. Tether was embedded into the Wall Street plumbing system as well as in its governing political apparatus.

Tether, in essence, has turned into a private bank. It issues dollars liabilities, gains seigniorage from the U.S. debt, distributes liquid through crypto economies, and all this while piggybacking off of it. The profit it makes per employee is comparable to the highest-profiting institutions in finance.

Surveillance via proxy

Stablecoins offer fast and borderless payment, but their design depends on compliance. In December 2023 Tether has maintained a proactive wallet-freezing policy The U.S. Office of Foreign Assets Control has sanctioned addresses. The company claims to have frozen billions of tokens tied to illegal activity. now works directly with the U.S. Secret Service and FBI. 

The regulators are demanding this, and it isn’t inherently evil. But it does mean that the enforcement of law now takes place within money. Control is no longer in the hands of banks alone, but rather the smart contracts that are issued by token-issuing companies.

Tether is extending USDT to Bitcoin-adjacent networks, such as Liquid You can also read about the RGB protocolThe compliance logic that is used in Bitcoin will also be applied to other payment channels and wallets. More identity, KYC or whitelisting systems will pop up around Bitcoin wallets. A network once known for its neutrality is now at risk of becoming a channel used to transmit surveillance grade rails.

Digital Dollar: A Political Economy

You can also find out more about the following: GENIUS Act’s Also, passage realigned digital currency politics. Sponsors framed the measure as a counter-CBDC, saying that private stablecoins limit government power and maintain choice. It is likely that the outcome will be similar to what would happen with a central-bank digital currency: Trackable, programmable dollar, but administered by the corporations, not the Fed. Many analysts believe that this is the beginning of “CBDC by proxy.”

This policy is also in line with current fiscal priorities. Each USDT represents a demand for short-dated Treasuries. This effectively funds the government which stablecoin supporters claim to be bypassing. Tether makes money from the interest paid on securities. It is a subsidy that comes from government debt.

The U.S. created a feedback loop based on dollars by placing stablecoins in the bond market. Bitcoin demand drives Treasury issuance and Treasury yields drive bitcoin profitability. Decentralization occurs by accident in that loop.

Bitcoin as Narrative Co-opted

Bitcoins are opposed by many, however sponsorships and event partnerships show just how easily principle is pushed aside in the name of money. Bitcoin conferences feature Tether executives, supporters and other speakers on the stage. “bridges” To adopt. 

A familiar refrain has emerged among those bitcoiners who take money from Tether,  ‘if stablecoins are inevitable, it’s better they be run by Bitcoiners’. Tether is also defended as a way to provide a safety net for those in nations that are locked out of dollar systems or who suffer from hyperinflation. It is an emotional narrative.  The mantras are convenient and turn compromise into virtue. This allows Bitcoiners to accept sponsorships from the system that they had sworn to fight.

It may comfort some but it is not clear. The USDT for Bitcoin doesn’t make Bitcoin more sovereign, it just makes the dollar more prevalent. By aligning with Tether to gain sponsorship or visibility, Bitcoin advocates or developers give moral legitimacy to an industry that relies heavily on the dominance of fiat. It’s ironic that Bitcoin’s staunchest defenders have now helped to reinforce the system it was created to combat.

The Money

Tether has a large market and a powerful message. Its billions of annual profits, along with its deep connections to Wall Street, allow it to sponsor conferences, finance research and shape narratives within the world of digital assets. The company’s executives are often invited to speak at conferences and policy forums, presenting stablecoins in a positive light as ally of freedom and innovation. Each appearance is a step towards normalising the idea that stablecoins in dollar terms represent Bitcoin progress.

Money tells another story. Every stablecoin settlement in USDT extends the dollar system’s reach Money is weaponized and this perpetuates it. The compliance layer is the most important. embeds surveillance deeper Into the blockchain economy. Each Bitcoiner, who is willing to accept this compromise, helps create a decentralized network that lasts mainly as a branding.

Bitcoin is not in need of an anti-Bitcoin conspiracy; all it needs are its fans to forget the things that made Bitcoin different. GENIUS Act and Tether’s rise, as well as the preference of regulators for private rails, all indicate a future in which digital money will exist, but not without permission. Tether isn’t the Trojan Horse, but rather a belief that using it will preserve freedom.

The end result is that too many Bitcoiners stay exactly where Tether wants, still bound to the system from which they try to flee.

Plain Memo is the author of this guest post. The opinions expressed by Plain Memo are theirs alone and not those of BTC Inc. or Bitcoin Magazine.