Tether Resumes Lending USDT Stablecoins, Raising Concerns
Tether Holdings quietly restarted lending USDT stablecoins to customers, despite previously promising to stop offering secured loans. This move has raised concerns among crypto investors due to Tether’s dominance in the stablecoin market and the potential risks associated with secured loans.
Tether’s Decision to Resume Lending
Tether has resumed lending its stablecoin to long-standing customers after a temporary halt. The aim is to protect customers from liquidity shortages and prevent them from selling assets at unfavorable rates. This decision comes in response to multiple short-term loan inquiries in Q2 2023.
Increase in Tether’s Secured Loans
Tether reported $5.5 billion in loans in its latest quarterly financial statement, an increase from $5.35 billion in the previous quarter. The company had previously pledged to reduce its secured loans to zero and improve the health of its reserves during 2023. Tether faced criticism for lacking transparency regarding its reserves, which were allegedly invested in risky financial instruments.
Potential Risks and Impact on the Crypto Industry
The increase in Tether’s lending activities poses potential risks to the crypto industry. Despite having a market cap above $83 billion, USDT has struggled to gain the trust of the community. Some investors have shifted to other stablecoins due to concerns surrounding Tether.
Tether’s Response and Financial Reports
Tether Holdings spokeswoman, Alex Welch, stated that these loans would be reduced to zero by 2024. She argued that the loans have helped customers avoid defaulting on existing loans and have increased liquidity. However, Tether’s incomplete financial reports have raised questions about the company’s actual financial health.
USDT’s Market Cap and its Impact
USDT, with a market cap of over $83 billion, dominates the stablecoin market compared to the second-largest stablecoin, USDC, which has a market cap of $26 billion. Tether’s entry into mining and Bitcoin investments has contributed to the increase in its market share. However, the dominance of USDT poses a risk to the crypto market, and any unforeseen events related to Tether and USDT could significantly impact crypto prices.
