Tether’s Unexpected Lending Hike Despite Previous Pledge to Halt

• Tether continues lending USDT, contradicting their previous statements.
• The latest report reveals $5.5 billion loans, up from $5.3 billion in the prior quarter.
• Wall Street Journal’s investigation sparks concerns and conversations around Tether’s transparency.

Tether’s unexpected lending rise stirs debate and questions on its promised transparency in the evolving crypto landscape.

Tether Backpedals on 2023 Lending Cessation

Despite committing to halting their lending practices, Tether has ostensibly pursued new USDT loans. Their recent financial disclosure highlights a surge in USDT-denominated loans, showcasing assets totaling $5.5 billion as of June 30, up from $5.3 billion three months prior. Wall Street Journal’s insights reveal that Tether’s move wasn’t an oversight but a calculated decision. Alex Welch, Tether’s spokesperson, justified the firm’s actions, citing longtime client relationships and the necessity to prevent liquidity crunches. Welch assures the public of a zero loan stance by 2024, contradicting Tether’s 2022 pledge.

Tether’s Statement vs Market Reality

Last year’s FTX cryptocurrency exchange collapse saw Tether striving to rebuild trust. Their assertion to decrease loans to nil in 2023 came as a hopeful move. However, contrary to this commitment, Tether’s actions show otherwise. Reacting to WSJ’s report, Tether criticized traditional financial institutions for their inadequate customer focus and lauded its excess reserves of over $3.3 billion, meant to minimize secure loan exposure.

Ambiguity Lingers Over Tether’s Loan Collaterals

Even as Tether asserts its loan issuance practices remain “over-collateralized by liquid assets”, their balance sheet transparency is under the scanner. The ambiguity stems from the lack of details regarding the collateral nature. Their quarterly figures reveal a 6.36% composition in secured loans, with a conspicuous absence of details about affiliations. Tether’s reserves predominantly feature U.S. Treasury bills, totaling about $55.8 billion, complemented by $3.3 billion in precious metals and approximately $1.7 billion in Bitcoin. Their minimalistic approach to the quarterly reports, audited by BDO Italia, gives little away about the borrowers, further fueling speculation.

Defending Amidst Controversy

Tether, amidst all discussions, stays firm on its footing. Their defense centers on the fact that a company with $3.3 billion in excess equity and prospective yearly profits of $4 billion effectively counterbalances the secured loans, retaining such profits in the balance sheet. Their emphasis remains on the commitment to eradicate secured loans from their reserves, albeit with a slightly shifted timeline.

Conclusion

The evolving narrative surrounding Tether’s lending practices offers a window into the complexities of the crypto financial landscape. As the digital currency market strives for legitimacy and trust, the onus is on giants like Tether to set precedents in transparency and commitment. The deviation from their lending pledge, though explained, will invariably raise questions. How Tether navigates these waters will significantly influence industry trust and the trajectory of crypto financial norms.