Tether’s Stablecoin Lending Sees Surge in 2023 Despite Plans for Phasing Out
Summary:
Despite its declaration to abolish stablecoin lending in December 2022, Tether witnessed a rise in these loans in 2023. The firm attributed the increase to short-term loan requests from longstanding clients. Despite previous controversies and transparency issues, the firm intends to eliminate such loans by 2024. Amid this, Tether's market dominance continues to grow, reporting a significant rise in surplus reserves.
Despite declaring its intention to eliminate stablecoin lending, also known as secured loans, in December 2022, Tether, the largest provider of stablecoin in the cryptocurrency market, saw an increase in such loans in 2023. Tether's most recent quarterly report revealed that as of June 30, the company's assets contained $5.5 billion of loans, a rise from $5.3 billion in the prior quarter. A Tether representative spoke to the Wall Street Journal, attributing the rise in stablecoin lending to brief loan requests from longstanding clients. The spokesperson also expressed the company's plan to completely abandon these loans by 2024.
These stablecoin loans had gained popularity as a lending product for Tether, offering clients the option to borrow USDT in exchange for collateral. Yet, the loans have been the subject of controversy due to the lack of transparency regarding the collateral and the borrowers.
Concerns were raised in a Wall Street Journal article in December 2022 about the products, and allegations were made suggesting these loans were fully backed by collateral. Questions were also raised about Tether's capability to meet redemption demands in crisis situations.
Tether addressed these controversies last year by announcing its decision to completely phase out secured loans in 2023. The firm dismissed the concerns surrounding the loans as "FUD" and reassured that the loans were more than adequately backed.
Tether has seen an uptick in secured loans even as its market dominance grows and profits increase. The firm reported a significant rise in surplus reserves, jumping from $250 million in September of the previous year to $3.3 billion. Despite reaching out to Tether for further comments, Cointelegraph has yet to receive a response.
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Published At
9/21/2023 9:50:12 AM
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