April 19, 2024
Tether's stablecoin lending experiences a surprising resurgence in 2023
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Tether’s $5.5 Billion Loan Revelation Sparks Crypto Market Interest

Tether, the leading issuer of stablecoins in the cryptocurrency market, has observed an increase in stablecoin lending activities during 2023, despite the company’s prior announcement of its intention to eliminate such loans by December 2022.

In its most recent quarterly report, Tether disclosed that its assets included $5.5 billion in loans as of June 30, marking a rise from the previous quarter’s figure of $5.3 billion. A spokesperson from Tether informed The Wall Street Journal (WSJ) that this recent surge in stablecoin lending can be attributed to a few short-term loan requests from clients with whom the company has established long-standing relationships. Additionally, the spokesperson conveyed the company’s plan to completely phase out these loans by 2024.

Stablecoin loans had gained popularity as a lending product offered by Tether, allowing customers to borrow USDT from Tether while providing collateral in return. However, these secured loans had consistently been under scrutiny due to a lack of transparency regarding the collateral and the borrowers.

In December 2022, a report by the WSJ raised concerns about these products and suggested that the loans were not fully backed by collateral. This report also questioned Tether’s ability to meet redemption requirements during times of financial crisis. Tether responded to these controversies in 2022 and subsequently announced its intention to eliminate secured loans in 2023. At that time, Tether dismissed concerns surrounding secured loans as FUD (fear, uncertainty, doubt) and maintained that the loans were overcollateralized.

The recent resurgence in secured loans for Tether coincides with the company’s increasing market dominance and profitability. Tether reported a surplus of $3.3 billion in reserves in September, a significant rise from the $250 million reported in 2022. Tether did issue a response to the WSJ article, asserting that the publication’s concerns regarding stablecoin loans were unfounded. The company also emphasized its robust financial position, stating that with $3.3 billion in excess equity and an expected annual profit of $4 billion, it is effectively offsetting the secured loans while retaining these profits within its company balance sheet. Tether remains committed to phasing out secured loans from its reserves.

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