Tether Resumes USDT Loans with Uncertain Risks
Date: 2023-09-21 Author: Dima Zakharov Categories: IN WORLD
Tether Resumes USDT Loans: What You Need to Know
In an unexpected turn of events, Tether Holdings, the issuer of the world's most popular stablecoin, USDT, has announced that it will once again start providing loans in the form of USDT. This decision comes after an earlier promise to reduce USDT lending to zero by the end of 2023.
Why Did the Company Change Its Decision?
Recently, Tether Holdings revealed that as of June 30, the total amount of loans issued by the company exceeded a staggering $5.5 billion. In just the second quarter of this year, this amount reached $5.3 billion. This change in the lending policy has sparked both curiosity and concern within the crypto community.
According to representatives of Tether Holdings, they have decided to resume lending after receiving numerous requests from long-term clients of the company. Alexa Welch, a spokesperson for Tether Holdings, assured that the loans extended will be fully repaid by 2024.
"In the second quarter of 2023, we received several requests for short-term loans from clients with whom we have long-term relationships, and we decided to fulfill these requests," Welch said.
The stated goal of Tether Holdings is to "prevent a significant decrease in liquidity for the company's clients." This implies that the company is responding to the needs of its clients, especially those engaged in rapid cryptocurrency trading who often require quick access to stable assets like USDT.
The Mystery of Tether's Creditors
One of the longstanding mysteries surrounding Tether Holdings is the identity of its creditors. The company does not disclose detailed information about its creditors, leaving many wondering who is borrowing such significant amounts in USDT.
It's worth noting that Tether loans are denominated specifically in USDT, a stablecoin pegged to the US dollar. Although Tether Holdings holds substantial assets in the form of US commercial paper, treasury bills, and other liquid assets, these assets may be insufficient to cover the loans issued, particularly in times of liquidity stress.
Potential Risks and Concerns
Tether Holdings' decision to resume USDT loans has raised concerns within the crypto community. The primary concern is that these loans could potentially lead to a crisis. If Tether Holdings finds itself in a situation where it does not have enough long-term liquid assets to repay these loans and redeem USDT tokens, it could lead to instability in the cryptocurrency market.
Furthermore, the lack of transparency in the company's operations and creditors has long been a point of contention. Changpeng Zhao, CEO of Binance, famously referred to Tether as a "black box," highlighting the opacity surrounding its financial operations. This lack of transparency has raised skepticism and dissatisfaction among both regulators and investors.
