According to CoinDesk, Tether's (USDT) dominant position as the largest stablecoin is vulnerable due to its dependence on the American market and pending regulations, JPMorgan said in a research report. Despite Tether not being based in the U.S., regulators can exert some control on the stablecoin issuer’s offshore usage through the Office of Foreign Assets Control (OFAC). The stablecoin's association with Tornado Cash, a crypto-mixer blacklisted by OFAC for facilitating money laundering, is one such example.

Indirect measures and international cooperation could potentially hinder the usage of Tether, analysts led by Nikolaos Panigirtzoglou wrote. Forthcoming stablecoin regulation will likely put indirect pressure on Tether as its attractiveness would diminish relative to stablecoins with more transparency and greater compliance with new regulatory KYC/AML standards. This issue would also apply to decentralized finance (DeFi), where USDT is used as a source of collateral and liquidity.

Stablecoin regulations are set to be coordinated globally via the Financial Stability Board (FSB) across the G20, further constraining the usage of unregulated stablecoins such as Tether. Tether has been under pressure to be more transparent about its reserves and has been working toward publishing real-time data. However, JPMorgan says the latest disclosures by the stablecoin issuer are not enough to reduce concerns. Tether's CEO Paolo Ardoino previously rebutted JPMorgan's claim that USDT’s dominance was bad for the wider crypto ecosystem.