Tether Records Increase in Stablecoin Lending Despite Previous Phase-Out Plans
Tether reports a rise in stablecoin loans in 2023 despite plans to end them.
Despite announcing plans in December 2022 to phase out stablecoin lending, Tether has reported an increase in this category for 2023. According to their recent quarterly statement, the cryptocurrency giant recorded $5.5 billion in loans on June 30, a slight bump from the $5.3 billion in the preceding quarter.
A representative from Tether attributed this increase to short-term loan demands from longstanding trusted partners. This representative also confirmed the company’s intention to completely cease such loan practices by the end of 2024.
Historically, Tether’s stablecoin loans offered an avenue for clients to obtain USDT, using collateral. These loans, however, attracted controversy and scrutiny over the clarity of both the collateral and the identity of the borrowers.
In December 2022, The Wall Street Journal had expressed concerns about the integrity of these loans, wondering if they were fully backed and pondering Tether’s capacity to meet redemption criteria during potential crises.
Before determining to discontinue secured loans in 2023, Tether addressed these issues. They referred to the concerns surrounding these loans as unfounded and emphasized that the loans had more than adequate collateral.
Interestingly, Tether’s decision to increase secured loans coincides with its growing market influence and profitability. In September, the company announced a surge in surplus reserves to $3.3 billion, a significant leap from the $250 million reported in 2022.
In a counter to The Wall Street Journal’s coverage, Tether stated that the apprehensions related to stablecoin loans were baseless. They asserted that their $3.3 billion excess equity and the company’s trajectory to realize an annual profit of approximately $4 billion effectively counterbalances the secured loans. They emphasized that they will keep the profits within the organization’s financial records and reiterated their commitment to discontinuing secured loans.
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