Tether Continues Lending USDT Despite Previous Plans to Stop
Tether, the stablecoin issuer, has reportedly continued lending its stablecoin USDT to clients, even though it previously announced that it would discontinue this practice. According to Tether’s latest quarterly financial update, the company has increased its issuing of USDT-denominated loans, with $5.5 billion of loans as of June 30.
While Tether had stated in a blog post last year that it would reduce its loans to zero in 2023, a spokeswoman for the company confirmed that new loans have been made. These loans were provided to prevent customer liquidity depletion or help clients avoid selling their collateral at unfavorable prices. However, Tether plans to reduce these loans to zero by 2024.
Contradictions and Uncertainties Surrounding Tether’s Secured Loans
There are uncertainties surrounding Tether’s secured loans. The company claims that these loans are over-collateralized by liquid assets, but the specific composition of these assets is not disclosed in the balance sheets. The quarterly report only mentions a composition of 6.36% in secured loans without providing further details.
The majority of Tether’s reserves consist of U.S. Treasury bills and other highly liquid assets, amounting to approximately $55.8 billion. Additionally, the reserves include around $3.3 billion in precious metals and $1.7 billion in bitcoin. Tether does not release a comprehensive balance sheet in its quarterly reports.
Tether Addresses Concerns About Secured Loans
In response to concerns raised by the Wall Street Journal report, Tether stated that traditional financial institutions are not adequately addressing customer needs and criticized their scrutiny of Tether’s operations. The company emphasized that it has more than $3.3 billion in excess reserves and is committed to reducing its secure loan exposure.
Tether’s minimal disclosure regarding the borrowers of its secured loans has raised questions about transparency. However, Tether asserts that it is offsetting the secured loans with its excess equity and retaining profits within its balance sheet. The company remains dedicated to removing these loans from its reserves in the future.
Hot Take: Tether’s Continued Lending Raises Concerns
The fact that Tether has continued lending USDT despite previous commitments to discontinue the practice raises concerns about the stability and transparency of the stablecoin market. The contradictions between Tether’s statements and actions, along with uncertainties surrounding the composition of its assets, contribute to a lack of confidence in the company.
While Tether asserts its commitment to reducing secured loans and maintaining excess reserves, further clarity and transparency are needed to address these concerns. The cryptocurrency community should closely monitor Tether’s actions and disclosures to ensure the stability and integrity of the market.
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