Tether, the largest stablecoin issuer in the crypto market, has seen an increase in its stablecoin lending in 2023 so far. However, it was previously announced that the firm would cut such loans down to zero. Based on Tether’s recent quarterly report, it was highlighted that the issuer’s assets included loans accounting for almost $5.5 billion as of June 30, which marked an increase of 45.3 billion in the last quarter.
A Tether spokesperson mentioned that the surge in stablecoin lending resulted from a few short-term loan requests from clients who had a strong relationship with the platform. The spokesperson reinforced the same statement regarding the company’s plans to cut down these loans to zero by 2024.
Tether Remains Confident Despite Critical Media Reports
Stablecoin loans have become a popular lending product as they allow users to borrow USDT in return for some collateral. Unfortunately, these loans have always been a controversial topic due to the lack of transparency on the collateral and the borrowers.
In December 2022, concerns regarding the products and claims about the full collateralization of these loans arose. As a result, many began to question Tether’s ability to meet redemption requirements in times of crisis. However, Tether addressed these controversies publically before announcing its plans to eliminate secured loans completely in 2023. At that time, the stablecoin issuer called the concerns around loans FUD and claimed that these loans were simply overcollateralized.
In response to recent reports, Tether stated,
“Anyone with a minimum understanding of financial markets would see how a company having $3.3 billion in excess equity and on track to make a yearly profit of $4 billion is in all effects offsetting the secured loans and retaining such profits within the company balance sheet. Tether is still committed to removing the secured loans from its reserves.”
The Market Cap of Tether’s USDT Might Pose a Risk
The recent surge in secured loans for the stablecoin issuer comes amid the growing market dominance along with profit for the firm. The issuer reported a profit of almost $3.3 billion in surplus reserves up from just $250 million last year in September.
USDC has a total market cap of almost $26 billion, whereas USDT has a market cap of more than $83 billion. The market share has increased considerably from $68 billion following Tether’s entry into mining along with Bitcoin investments.
However, some analysts believe that the dominance of USDT might pose a risk to the crypto market along with present loans. USDT recently faced a depegging scenario amid the crisis at Curve Finance. Similarly, any unknown event to Tether along with USDT would play a major role in impacting crypto prices as a whole.
