A pegged asset like Tether would be a good item for regulators to look at. Since it is more than just payment processing it should be treated like cash. One way to limit it's use is to allow limited licenses for its issuance in some arbitrary proportion to the m-zero money supply. Then there is no reason to track it afterward, just like cash. Regulators can inflate its issuance with Keynesian alacrity.
This type of money supply manipulation would not be accepted by the community (tethers are backed assets, not pegged assets).
The tether creation/destruction events are recorded on the blockchain, for starters. In order to retain the trust of the community, the amount of tethers in circulation could never be bigger than the number of dollars in the reserve. If the number of tethers on the blockchain exceeded the number of dollars in the reserve (entering fractional reserve territory), the entire premise of the token, and the trust of the community would be lost.
Craig