Tether to reduce secured loans to zero in 2023 amid battle against FUD
The world’s largest stablecoin issuer, Tether, has pledged to eventually stop the practice of lending out funds from its reserves, saying it is “mission critical to restore faith" in the crypto market.
In a Dec. 13 post, the stablecoin issuer addressed recent mainstream media FUD (fear, uncertainty, and doubt) concerning its secured loans, among other FUD which have hit the "rumor mill."
Tether reiterated that its secured loans are over-collateralized and covered by “extremely liquid assets,” while also adding that the firm would be eliminating these loans throughout 2023, stating:
Tether’s secured loans operate similarly to private banks lending to customers using secured collateral, the company explained. However, unlike banks that operate on fractional reserves, Tether claimed that its loans are fully backed by over 100%.
The move is likely in response to a WSJ report earlier this month that alleged these loans were risky. It claimed that the “company may not have enough liquid assets to pay redemptions in a crisis.”
#Tether Addresses FUD Around Secured Loans, Reveals Plans to Reduce These to Zero in 2023https://t.co/nZcPr8RiF1
It is not the first time the WSJ has targeted Tether. In August the outlet said that Tether could be deemed “technically insolvent” if its assets fell just 0.3%. The stablecoin issuer refuted the claims at the time stating that it had increased the legitimacy and transparency of its attestations by hiring a top-5 accounting firm.
According to those attestations, 82% of Tether reserves are held in "extremely liquid" assets.
In October, Tether responded to more media FUD by further eliminating commercial paper from its reserves and replacing the investments with U.S. Treasury Bills.
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