The largest stablecoin issuer Tether has launched a new version of its US stablecoin, while its competitor Circle has dropped over 5%

The world's largest stablecoin issuer Tether is developing a digital dollar version that complies with U.S. regulations and has appointed former White House cryptocurrency official Bo Hines to lead the initiative.

Tether stated in a release on Friday that the new stablecoin, named USAT, will be minted and redeemed through the stablecoin issuance platform of Anchorage Digital Bank NA and will meet U.S. regulatory requirements. Cantor Fitzgerald LP, which is already responsible for managing Tether's primary stablecoin USDT reserve assets, will also oversee the reserve assets of this new stablecoin.

Tether hired Hines in August to assist in coordinating its expansion efforts in the U.S., just weeks after he left the Trump administration. Hines was the head of the Trump Digital Assets Advisory Committee.

A stablecoin is a type of cryptocurrency designed to maintain a stable value, typically by holding a basket of assets as reserves to mimic the value of fiat currencies like the U.S. dollar. Earlier this year, U.S. lawmakers passed the Genius Act, which established federal rules for the industry for the first time, including requirements on what types of assets can be held in the issuer's reserves.

Tether's USDT is the largest stablecoin globally, pegged to the U.S. dollar, with a circulation of approximately $170 billion. While its reserves primarily consist of cash equivalents like short-term government bonds, Tether, headquartered in El Salvador, also uses a variety of assets, including Bitcoin, secured loans, and precious metals to back USDT—none of which comply with U.S. regulatory requirements. Therefore, the company must create a separate stablecoin to gain approval in the U.S. market.

This announcement deepens Tether's ties to the U.S. market, from which it had ceased direct services to U.S. customers years ago. The privately held company previously paid $41 million to U.S. authorities in 2021 to settle allegations of misreporting its reserves.

The pro-cryptocurrency government of former President Trump encouraged more digital asset companies to return to the U.S. This year, several enforcement actions taken by U.S. regulators against major crypto companies have been paused or dismissed.

This move is expected to intensify competition between Tether and its closest rival Circle. Circle is the issuer of the second-largest stablecoin USDC, headquartered in New York, and went public in June this year. Circle has long relied on compliance with U.S. regulations and its global regulatory license portfolio to maintain a competitive edge among institutional crypto users.

On Friday, Circle's stock price fell over 5% during trading, although it had previously rebounded significantly on Thursday, rising over 17% in a single day, reversing a recent downturn.