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Tether, the largest stablecoin issuer in the cryptocurrency market, has reported an increase in its stablecoin lending, or secured loans, during 2023. This rise occurred despite the company announcing in December 2022 that it intended to reduce these loans to zero.
In its latest quarterly report, Tether stated that its assets included $5.5 billion in loans as of June 30, an increase from $5.3 billion in the previous quarter. A Tether spokesperson told The Wall Street Journal (WSJ) that the recent growth in stablecoin lending was driven by short-term loan requests from clients with whom the firm has cultivated longstanding relationships. The spokesperson also confirmed that the company plans to eliminate these 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 have always been surrounded by controversy due to a lack of transparency regarding the collateral and the borrowers.
A WSJ report in December 2022 raised concerns about the products, claiming that the loans were not fully collateralized. The publication questioned Tether’s ability to meet redemption requirements during times of crisis.
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Tether addressed these controversies in 2022 before announcing its plan to eliminate secured loans in 2023. At the time, the stablecoin issuer dismissed the concerns around secured loans as “FUD” (fear, uncertainty, and doubt) and claimed that the loans were overcollateralized.
The recent increase in secured loans for Tether coincides with the firm’s growing market dominance and profits. Tether reported $3.3 billion in surplus reserves in September, a significant rise from $250 million in 2022. Cointelegraph reached out to Tether for comment but has not received a response.
However, Tether did release a response to the WSJ article, claiming that the publication’s concerns regarding stablecoin loans were uncalled for. Tether added that as a company with $3.3 billion in excess equity and “on track to make a yearly profit of $4 billion,” it is effectively offsetting the secured loans and retaining such profits within the company balance sheet. Tether stated it remains committed to removing secured loans from its reserves.
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