Tether's Rise in Stablecoin Lending Despite Plans to Cut Loans by 2024

Tether, the largest stablecoin issuer, has experienced a surge in secured loans despite their intention to eliminate such loans by 2024. Find out more about the controversies and Tether's plans for stablecoin lending.

Posted 8 months ago in DeFi and CeFi

A graphic depicting Tether's rise in stablecoin lending despite its plans to cut loans by 2024.

Tether, the largest stablecoin issuer in the crypto market, has seen a rise in its stablecoin lending, or secured loans, in 2023, despite the firm having announced it will cut such loans down to zero in December 2022. In the company’s latest quarterly report, Tether noted that its assets included $5.5 billion of loans as of June 30, up from $5.3 billion in the previous quarter.

A Tether spokesperson told The Wall Street Journal (WSJ) that the recent rise in stablecoin lending was due to a few short-term loan requests from clients with whom the firm has “cultivated longstanding relationships.” The spokesperson also said the company plans to cut such loans to zero by 2024. Stablecoin loans had become a popular lending product for Tether, allowing customers to borrow USDT from Tether in return for some collateral.

However, these secured loans were always shrouded in controversy due to a lack of transparency on the collateral and the borrowers. A WSJ report in December 2022 raised concerns about the products and claims that the loans were not fully collateralized. The WSJ questioned Tether’s ability to meet redemption requirements in times of crisis.

Tether addressed the controversies in 2022 before announcing its plan to eliminate secured loans in 2023. At the time, the stablecoin issuer called the concerns around secured loans “FUD” and claimed the loans were overcollateralized.

The recent rise in secured loans for Tether comes amid growing market dominance and profit for the firm. Tether reported $3.3 billion in surplus reserves in September, up from $250 million in 2022.

Tether is still committed to removing the secured loans from its reserves.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space. Magazine: Deposit risk: What do crypto exchanges really do with your money?

Last updated 9/21/2023, 5:17:28 AM


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