Tether pledges to stop issuing secured loans from its reserves

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Memeinator Coin

Tether pledges to stop issuing secured loans from its reserves

By Charles Thuo - min read
  • Tether on Tuesday addressed the FUD around secured loans.
  • The secured loans held in Tether’s reserves are overcollateralized and covered by extremely liquid assets.
  • It also revealed plans to stop issuing secured loans from its reserves in 2023.

In a press release on Tuesday, Tether came out to address the FUD directed at its secured loans and revealed that it is planning to reduce the secured loans starting now throughout 2023.

While addressing the issue around issuing secured loans from its reserves, Tether also reiterated that it has proven resilient and has weathered eight solid years of tumultuous crypto markets. Tether noted:

“Unlike countless parties that have gone bankrupt or are facing bankruptcy risks on the back of widespread fraud, leverage and bad risk management, Tether has prioritized transparency, accountability and operational excellence above all else.”

It also affirmed to its customers that the secured loans from its reserves, which are at the heart of a heated debate, are “overcollateralized and covered by extremely liquid assets.”

Restoring faith in the market

2022 has been a year of great misfortunes for the crypto industry starting from the collapse of the original Terra LUNA project to the recent collapse of FTX which was the second-largest crypto exchange at the time of collapsing. Realizing the events that have unfolded so far, Tether recognizes that it has a duty to restore faith in the market.

In the press release, Tether said:

“Tether is professionally and conservatively managed and this will be demonstrated once again by successfully winding down the lending business without losses (since all loans are over-collateralized by liquid assets). Tether risk management has shown over several years to be best in class while dealing with the unjustified fears created by fudders and speculative attempts of a few to take Tether down to the detriment of Tether users which represent the wider community.”

Tether has survived several FUDs so far starting from claims that it had 70% of its reserves in Evergrande only for the Evergrande crisis to unfold without any impact on Tether. There were also claims that Tether’s commercial paper reserves could not sell since they were worthless only for Tether to sell out all its commercial papers.

To date, Tether’s USDT is the largest stablecoin by market cap according to data from CoinMarketCap. It is followed at a distance by the USD coin (USDC) and the Binance USD (BUSD).