Tether, the leading issuer of stablecoins in the cryptocurrency market, has experienced a surge in stablecoin lending activity during 2023, despite having previously declared its intention to phase out such loans entirely by December 2022.
In its most recent quarterly report, Tether disclosed that its assets included a total of $5.5 billion in loans as of June 30, marking an increase from the $5.3 billion reported in the previous quarter.
A spokesperson from Tether explained to The Wall Street Journal (WSJ) that this upturn in stablecoin lending was primarily driven by a few short-term loan requests originating from clients with whom the company had established long-standing relationships.
It was emphasized that Tether remains committed to reducing these loans to zero by 2024, as initially announced.
Stablecoin loans had previously gained popularity as a lending product offered by Tether, permitting customers to borrow USDT while providing collateral in return.
Nevertheless, these secured loans had often been surrounded by controversy due to a lack of transparency concerning both the collateral and the borrowers.
The WSJ’s report in December 2022 had raised substantial concerns regarding these lending products, asserting that they were not fully collateralized.
Doubts were also cast on Tether’s ability to meet redemption requirements during times of market instability.
Tether addressed these controversies during 2022, prior to announcing its plan to phase out secured loans in 2023.
At the time, the stablecoin issuer dismissed concerns surrounding these loans as “FUD” (Fear, Uncertainty, Doubt) and insisted that they were overcollateralized.
The recent resurgence in secured loans for Tether coincides with the firm’s expanding market dominance and profitability.
Tether reported a surplus reserve of $3.3 billion in September, a notable increase from the $250 million figure reported in 2022.
Despite reaching out to Tether for comment, Cointelegraph has not yet received a response.
Nonetheless, Tether did issue a response to the WSJ article, asserting that the publication’s concerns regarding stablecoin loans were unwarranted.
Tether emphasized that as a company boasting $3.3 billion in excess equity and projecting an annual profit of $4 billion, it was effectively offsetting the secured loans and retaining such profits within its corporate balance sheet.
Tether remained steadfast in its commitment to eventually eliminate secured loans from its reserves.
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