Tether brushes off concerns over restarting controversial USDT short-term loan services News ▸ Tether ▸ Stablecoins
Tether brushes off concerns over restarting controversial USDT short-term loan services
Tether said it remains committed to removing secured loans from its reserves.
2 min read
Updated: Sep. 21, 2023 at 12:06 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Stablecoin issuer Tether (USDT) has silently resumed its secured lending services less than a year after publicly announcing that it would remove it this year.
Using Tether’s quarterly financial update, the Wall Street Journal reported that the stablecoin’s issuer loan assets increased to $5.5 billion as of June 30 from the $5.3 billion recorded in the previous quarter. A Tether spokesperson reportedly said the increase was due to a “few short-term loan requests from clients with whom [the company] have cultivated longstanding relationships.”
The lending services involve Tether issuing loans denominated in its USDT tokens to borrowers. Market observers have raised concerns about this practice as there is no certainty that the borrowers would pay back or that the stablecoin issuer could be able to sell the loans immediately. Additionally, Tether has failed to provide adequate transparency on the kind of collateral the borrowers provide.
Last year, crypto lending service providers, including Celsius, BlockFi, and others, folded up following the record market downturn that negatively impacted their business models.
While Tether has consistently maintained that the “secured loans held in its reserves are overcollateralized and covered by extremely liquid assets,” a failure of its business could prove catastrophic for the crypto industry as its USDT stablecoin is the largest in the market.
Tether remains ‘committed to removing secured loans’
In a Sept. 21 statement, Tether stated that it remained committed to removing secured loans from its reserves.
The stablecoin issuer did not provide a definite timeline for when it plans to remove the loans. However, its spokesperson had told WSJ the company plans to remove such loans by next year.
Meanwhile, the stablecoin issuer further addressed concerns its secured loans have raised, saying it “has accrued more than $3.3 billion in excess reserves to effectively reduce secure loan exposure as net result.”
It added:
“Anyone with a minimum understanding of financial markets would see how a company having $3.3 billion in excess equity and on track to make a yearly profit of $4 billion is in all effects offsetting the secured loans and retaining such profits within the company balance sheet.”
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Posted In: Tether, Stablecoins
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Oluwapelumi Adejumo
Oluwapelumi values Bitcoin's potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.
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In this article
Launched in 2014, Tether is a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner.
Tether Limited
Tether Limited is the company that introduced Tether (USD₮ or USDT), an asset-backed cryptocurrency stablecoin, in 2014.
Celsius Network
Celsius Network is a bankrupt cryptocurrency lending company that was founded in 2017 and headquartered in Hoboken, New Jersey.
BlockFi
BlockFi is a defunct cryptocurrency lender company which is currently in bankruptcy proceedings.
