tries to put your worries about “secured loans” to rest.
Tether, which makes crypto assets (virtual money) like the US dollar stablecoin “USDT,” said on December 13 that the USDT reserve will have no secured loans from now until the end of 2023.
In the background, the Wall Street Journal reported on January 1 that Tether is lending out more tokens it owns to customers, which may not be redeemable in a crisis.
At the end of 2021, these “secured loans,” which made up 5% of Tether’s total assets, were worth about $560 billion ($4.1 billion), but as of September 30, 2018, they were worth about $830 billion ($6.1 billion). and made up 9% of the total assets of the company.
Tether said that it only gives these USDT-based loans to “qualified customers” and that borrowers must provide “liquid collateral that can be sold for US dollars.” He also said that the loans are for a short time.
There have been news stories about the dangers of the lending business.
The Wall Street Journal said that not much was known about the people who took out these loans or the collateral that Tether would accept. Stablecoins like USDT are used a lot in cryptocurrency trading, so “Tether’s increased lending poses widespread risks to the cryptocurrency world.”
For example, Tether gave money to the cryptocurrency lender Celsius Network, which later went bankrupt. At this time, Tether said, “Celsius’ position was liquidated without causing any loss to Tether.” This shows one of the risks in the lending business.
Tether has said that the worries being talked about are just untrue rumours and that “secured loans held in reserves are overcollateralized and backed by highly liquid assets.”
On top of that, it has said that it will stop secured lending to stop rumours and build trust. Tether said that USDT is still being managed “professionally and cautiously,” which will be shown again when the lending business is shut down without any losses.
Join your efforts
Tether has tried to be more open about what assets are in its reserve.
By October, it had taken all of the commercial paper out of its stablecoin reserves and put it in safer US Treasury securities instead.
Commercial paper is a promissory note that doesn’t have to be paid back right away. In response to worries that Tether doesn’t know much about the companies it has contracts with, the company has slowly cut back on this and has now completely let go.