- Tether, a stablecoin issuer, has reversed its 2023 decision regarding USDT loans, revealing a significant increase in loans.
- As of June 30, Tether had $5.5 billion in loans, up from $5.3 billion in the previous quarter.
- The decision was made to protect clients’ liquidity and avoid selling collateral assets at unfavorable prices.
- This contrasts with its December 2022 decision to gradually reduce secured loans in USDT reserves to zero.
Tether, the stablecoin issuer, has made an unexpected reversal in its 2023 decision regarding loans denominated in USDT, offering them once again to its clients. This shift in strategy was revealed in Tether’s latest quarterly financial update, which showed a noticeable increase in USDT-denominated loans. As of June 30, the report indicated that Tether had $5.5 billion in loans, up from the previous quarter’s $5.3 billion.
Alex Welch, a spokesperson for Tether, confirmed that the company had indeed extended new loans during the second quarter of 2023. Tether’s decision to re-enter the lending market can be attributed to two primary reasons. Firstly, the company aims to safeguard its clients’ liquidity, ensuring they can conduct their operations without encountering liquidity constraints. Secondly, Tether seeks to assist its clients in avoiding the need to sell their collateral assets at potentially unfavorable prices.
This decision by Tether stands in stark contrast to its announcement late in the previous year. In December 2022, Tether had declared its intention to gradually reduce secured loans in USDT reserves to zero over the course of 2023. This decision was made in response to the collapse of the crypto exchange FTX and was intended to restore trust in the market.
In response to the news of its decision to resume stablecoin lending activities, Tether defended its actions in a separate blog post. The company argued that traditional financial institutions were falling short in meeting customer requirements, potentially posing risks to the broader economy. Tether also criticized the Wall Street Journal for not delving deeper into this matter.
Tether underscored that it had amassed more than $3.3 billion in excess reserves, effectively offsetting secured loans while maintaining profits on its balance sheet. The company remains committed to gradually eliminating secured loans from its reserves.
It is noteworthy that Tether projected a substantial annual profit of $4 billion, asserting that this profitability, coupled with its substantial reserves, was mitigating the impact of secured loans and enabling it to maintain a healthy balance sheet.
In a separate development, Tether announced a strategic investment in Northern Data Group, a Germany-based provider of data center and cloud environment services. This partnership signifies Tether’s expansion beyond the fintech sector, with plans to collaborate on artificial intelligence (AI), communication, and data storage initiatives.