TL;DR Breakdown
- Tether has resumed lending its stablecoin, USDT, to clients despite announcing last year that it would discontinue such practices.
- The company’s latest financial update shows an increase in USDT-denominated loans, with assets now including $5.5 billion in loans as of June 30, 2023.
Description
Tether, the issuer of the stablecoin USDT, has resumed lending operations to clients. It is important to know that this recent move comes less than a year after the company publicly stated it would cease such activities. Tether’s latest quarterly financial update reveals that as of June 30, 2023, the company’s assets included $5.5 billion … Read more
Tether, the issuer of the stablecoin USDT, has resumed lending operations to clients. It is important to know that this recent move comes less than a year after the company publicly stated it would cease such activities. Tether’s latest quarterly financial update reveals that as of June 30, 2023, the company’s assets included $5.5 billion in loans. This is an uptick from $5.3 billion in the preceding quarter.
Alex Welch, a spokeswoman for Tether, confirmed the issuance of new loans. During the second quarter of 2023, Tether received loan requests from clients with whom they have long-standing relationships.
Consequently, the company chose to accommodate these requests. Welch outlined two primary reasons for this action. One was to prevent any depletion of customer liquidity. The other was to assist clients in avoiding the sale of their collateral at potentially unfavorable prices.
The inconsistencies
This recent action by Tether seems to be at odds with its earlier commitments. In December 2022, Tether announced its plan to reduce its secured loans to zero by the end of 2023. This statement was issued following the collapse of the FTX cryptocurrency exchange and was intended to restore market confidence.
In defense of its recent actions, Tether issued a statement criticizing traditional financial institutions. The company argued that these institutions are not adequately serving their customers, thereby harming economic growth. Additionally, Tether highlighted that it has accumulated more than $3.3 billion in excess reserves to effectively reduce secure loan exposure.
The bulk of Tether’s assets, as disclosed in their most recent quarterly report, are in U.S. Treasury bills and other highly liquid assets. These Treasury bills constitute approximately $55.8 billion of the company’s reserves. Also listed are around $3.3 billion in precious metals and roughly $1.7 billion in Bitcoin. Tether’s reserves undergo independent audits in periodic attestations by accounting firm BDO Italia. However, the company offers minimal information regarding the identity of its loan borrowers.
Tether also projected a substantial yearly profit of $4 billion. This level of profitability, along with its significant reserves, is presented as effectively mitigating the impact of secured loans on its balance sheet. Therefore, the company asserts that it maintains a healthy financial standing.
The news of Tether resuming its USDT lending operations has certainly caught the attention of industry observers. While the company defends its actions by pointing to its robust financial health, the lack of transparency in its dealings continues to be a point of discussion in financial circles.
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