Despite earlier plans, Tether records increased stablecoin loans in 2023

Despite earlier plans, Tether records increased stablecoin loans in 2023

Tether, the leading issuer of stablecoins in the cryptocurrency market, has reported an increase in its stablecoin lending activities, despite announcing its intention to eliminate such loans by the end of 2022.

According to Tether’s latest quarterly report, the company’s assets included $5.5 billion in loans as of June 30, marking a slight increase from the previous quarter’s $5.3 billion. A spokesperson for Tether informed The Wall Street Journal (WSJ) that this recent uptick in stablecoin lending was primarily due to a few short-term loan requests from long-term clients with established relationships. The spokesperson reiterated the company’s plan to completely phase out these loans by 2024.

Stablecoin loans had become a popular financial product offered by Tether, enabling users to borrow USDT in exchange for collateral. However, these secured loans had faced scrutiny due to a lack of transparency regarding collateralization and the borrowers’ identities.

In December 2022, a WSJ report raised concerns about these products, alleging that the loans were not fully backed by collateral. The report questioned Tether’s ability to meet redemption demands during times of financial stress.

Tether had addressed these controversies in 2022, defending the collateralization of its loans and dismissing concerns as “FUD” (Fear, Uncertainty, Doubt) at the time. The company had maintained that its loans were overcollateralized.

The recent resurgence of secured loans for Tether coincides with its growing market dominance and profitability. In September, Tether reported surplus reserves of $3.3 billion, a significant increase from the $250 million reported in 2022. Despite reaching out to Tether for comment, Cointelegraph has not received a response.

However, Tether did release a response to the WSJ article, asserting that the publication’s concerns regarding stablecoin loans are unwarranted. Tether emphasized that with $3.3 billion in excess equity and a projected annual profit of $4 billion, it is effectively offsetting the secured loans and retaining profits within the company’s balance sheet. Tether reiterated its commitment to removing secured loans from its reserves as previously announced.