Beyond USDT: Tether's New USAT Stablecoin Targets U.S. Market -- Should You Care?

Key Points

• Tether's new USAT stablecoin is explicitly designed to comply with U.S. regulations like the GENIUS Act.

• Coinbase users will barely notice USAT's arrival since the exchange already favors (and makes money from) Circle's USDC solution.

• Stablecoins aren't great investments but rather digital versions of dollars, making USAT just another tool for moving money in crypto markets.

• 10 stocks we like better than Tether ›

There will soon be a new stablecoin on the market -- on the American crypto market, to be specific. Stablecoin giant Tether is prepping the launch of USAT, an all-American alternative to the global Tether (CRYPTO: USDT) coin.

What's the big idea, and should you consider buying Tether's new stablecoin when it becomes available?

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Tether is a big name

Before diving into the new coin, let's think about Tether's namesake stablecoin for a minute.

The well-known Tether coin is the largest stablecoin by market value and direct dollar-based cash backing. With a market cap of $180 billion, it's also the fourth-largest cryptocurrency of all, behind only Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and XRP.

The team behind British crypto exchange Bitfinex launched Tether as a dollar-based stablecoin on the Bitcoin blockchain in 2014. In other words, the original version of Tether used Bitcoin technology to make its transactions. Later, the increasingly independent Tether organization added support for several altcoin blockchains, starting with Ethereum. This expansion accelerates Tether's transactions and adds new features in some instances.

Dodging the downsides of Tether's broad tech adoption

Tether's wide support of underlying blockchains is both a feature and a flaw. Owners are often reminded to double-check the address when they're sending Tether to somebody else. Attempting to send Ethereum-based Tether to a Solana (CRYPTO: SOL) or Tron (CRYPTO: TRX) version of Tether will either just fail or perhaps result in an entirely lost transaction.

Popular crypto-trading exchanges will probably triple-check before attempting one of these incorrect transfers, but it is an additional step in the sending process.

The new USAT coin doesn't have to match the technology support of its famous sibling. It is built from the ground up and not tied to a particular blockchain network. Instead, it relies on the "Hadron by Tether" tokenization platform, which in turn supports a wide range of actual networks. The Hadron layer should simplify the process, dodging Tether's platform selection issues and making the stablecoin experience a little bit smoother.

Rules and regulations

But that's not the main reason behind the USAT launch. It's all about ironclad compliance with U.S. regulations, starting with the recent GENIUS Act. Investment bank Cantor Fitzgerald is the custodian of USAT's dollar-based cash backing, mostly in the form of U.S. Treasuries. Anchorage Digital Bank will serve as the official issuer of USAT, bridging the gap between the crypto world and traditional banking. This link is one requirement of the GENIUS Act, which Tether highlights as a guiding light for the USAT launch.

The existing Tether stablecoin also strives to meet local regulations, of course. But USAT is made explicitly for the American market and will only focus on meeting the U.S. government's requirements. Being the default stablecoin of most crypto exchanges around the world, USDT (the original Tether coin) will continue to dodge legal pitfalls in places like China, Venezuela, and South Africa.

So Tether is trying to earn more exposure to the U.S. market where the leading Coinbase Global (NASDAQ: COIN) crypto exchange prefers the USDC (CRYPTO: USDC) stablecoin. That probably won't change, since Coinbase has developed and continues to profit from USDC usage in a partnership with Circle Internet (NYSE: CRCL).

Coinbase will probably support USAT trades, since it would be silly to block a potentially large coin from sending money to Coinbase users. But holding USDC on Coinbase generates a 4.1% annual reward rate (like the annual interest rate on savings accounts), while other stablecoins don't come with rewards on this platform.

Tether's new coin should make a splash on American crypto exchanges not named Coinbase, such as Binance US, Robinhood (NASDAQ: HOOD), and Kraken. Coinbase users should barely notice its arrival.

Image source: Getty Images.

Should I buy USAT?

Stablecoins are generally not something you invest in -- in the traditional sense. They're more like an all-digital version of fiat currencies, representing dollar values in a faster and (usually) less taxable format. So if you have a crypto account with Coinbase, USAT's arrival won't change much. Accounts on other exchanges could start using this new tool without fanfare. They have to notify users with an email or postcard, but it's the kind of inconsequential junk mail that most people will just discard without reading.

And the Tether group will make money from a new source. It will also give Tether more incentive to stabilize the American crypto market's legal framework over time. Complying with regulations is a good start, but Tether should have more influence on the shaping of new regulations with this red, white, and blue stablecoin under its non-American belt.

The regulatory feedback loop could make Tether's USAT coin a powerful player in the U.S. crypto market. So I'm glad it's coming, but I won't go out of my way to acquire this coin. It's just another invisible tool in the crypto owner's toolbelt.

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Anders Bylund has positions in Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.