Tether Resumes Offering Collateralized Loans in USDT
Stablecoin issuer Tether has announced that it is once again providing new loans denominated in USDT to clients. This move comes as a surprise, considering that the company had previously stated its intention to discontinue offering collateralized loans in 2023. According to Tether’s latest financial update, there has been an increase in USDT-denominated loans, with $5.5 billion in loans recorded as of June 30.
Reasons for Resuming Loans
Alex Welch, a spokesperson for Tether, explained that the decision to resume lending was made in order to prevent customer liquidity depletion and to assist clients in avoiding selling their collateral at unfavorable prices. These reasons highlight the company’s commitment to supporting its clients and ensuring their operations continue smoothly.
Contrasting Announcement
Tether’s decision to resume lending the USDT stablecoin contradicts its previous announcement to reduce secured loans in USDT reserves to zero throughout 2023. This initial statement was made after the collapse of FTX crypto exchange with the aim of restoring trust in the market.
Tether Responds to Report
In response to the report on its decision to resume stablecoin lending activities, Tether defended its actions. The company criticized traditional financial institutions for failing to meet customer requirements and emphasized that it has accrued more than $3.3 billion in excess reserves to reduce secure loan exposure.
Tether’s Profitability and Commitment
Tether projected a substantial yearly profit of $4 billion and reiterated its commitment to removing secured loans from its reserves. The company emphasized that its profitability and reserves are effectively mitigating the impact of secured loans, ensuring a healthy balance sheet.
WSJ’s Doubts and Tether’s Response
The Wall Street Journal has previously expressed concerns about Tether’s ability to meet redemption requests during times of financial stress. Tether dismissed these doubts and suggested that the publication may have ulterior motives in its reporting.
Hot Take: Tether Resumes Collateralized Loans Despite Previous Announcement
Tether, the stablecoin issuer, has surprised the market by resuming its provision of collateralized loans in USDT. This move contradicts the company’s earlier announcement to reduce such loans to zero throughout 2023. While Tether states that the loans are aimed at preventing customer liquidity depletion and assisting clients, it has faced criticism for going against its previous commitment. The Wall Street Journal has cast doubts on Tether’s ability to meet redemption requests in the past, but Tether maintains that it has sufficient reserves to mitigate the impact of secured loans. The company projects a substantial yearly profit and remains committed to removing secured loans from its reserves.
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