Tether, based in El Salvador, recently announced that its U.S. Treasury holdings have reached $135 billion, making the company the 17th-largest holder of American debt globally, just behind Germany. Tether has faced a bank run once before. In May 2022, when the company’s assets amounted to about $80 billion, Tether saw demands for $10 billion in redemptions over two weeks. The panic was triggered by doubts that Tether was not in fact matching its obligations with safe and liquid holdings. It was also investing in digital assets and corporate bonds, which carry a higher risk for often-higher returns. Had the company tanked, the U.S. government could have shrugged off its failure. But as Tether’s deposits and assets continue to grow, a failure to repay U.S.-dollar deposits will be harder to ignore.

Given that the GENIUS Act doesn’t take effect until 2027, there’s time to contain the damage. This would mean treating stablecoin issuers as deposit takers, and requiring all U.S.-dollar stablecoin issuers that do business in the U.S. to pay insurance on their deposits. Stablecoin issuers should also be required to supplement their monthly disclosures with the same event-based disclosures required of banks. Stablecoin issuers that wish to do business in the United States should be domiciled and pay taxes here, as banks must, not in El Salvador or the Cayman Islands.