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Tether stablecoin loans rise in 2023 despite downsizing announcement in 2022

Tether stablecoin loans rise in 2023 despite downsizing announcement in 2022

Tether, the largest stablecoin issuer in the crypto market, has observed an increase in its stablecoin lending, or secured loans, in 2023, despite its earlier announcement to reduce such loans to zero by December 2022.

In its latest quarterly report, Tether stated that it had $5.5 billion of loans as of June 30, up from $5.3 billion in the previous quarter. According to a spokesperson from Tether who spoke to The Wall Street Journal (WSJ), the recent surge in stablecoin lending was due to short-term loan requests from long-standing clients. The spokesperson also mentioned that the company plans to eliminate such loans entirely by 2024.

Tether stablecoin loans on the rise in 2023. Source: The Company

Stablecoin loans had become a popular lending product for Tether, allowing customers to borrow USDT from Tether in exchange for collateral. However, these secured loans had faced controversy due to a lack of transparency regarding the collateral and the borrowers.

A WSJ report in December 2022 raised concerns about the products and claimed that the loans were not fully backed by collateral. Questions were raised about Tether’s ability to meet redemption requirements during times of crisis.

Related: Crypto Biz: You can’t stop the Tether FUD

Tether addressed these controversies in 2022 before announcing its plan to eliminate secured loans in 2023. The stablecoin issuer referred to the concerns surrounding secured loans as “FUD” and affirmed that the loans were overcollateralized.

The recent increase in secured loans for Tether coincides with its growing market dominance and profitability. Tether reported a surplus reserve of $3.3 billion in September, compared to $250 million in 2022. Cointelegraph reached out to Tether for a comment but has not received a response.

However, Tether did release a response to the WSJ article, stating that the publication’s concerns about stablecoin loans are unfounded. Tether added that as a company with $3.3 billion in excess equity and an expected annual profit of $4 billion, it is effectively offsetting the secured loans and retaining such profits within its balance sheet. Tether remains committed to eliminating secured loans from its reserves.

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