Tether Holdings, the issuer of the USDT stablecoin, has resumed its controversial lending practices. The company’s Q2 2023 report shows an increase in loans to $5.5 billion, up from $5.3 billion in the previous quarter. This move comes despite Tether’s earlier commitment to phase out such loans.
The decision to restart lending was reportedly prompted by short-term loan requests from long-standing clients. Tether’s spokesperson, Alex Welch, stated that the company decided to accommodate these requests to protect clients from liquidity shortages and prevent them from having to sell assets at unfavorable rates.
Crypto Experts Are Concern About the Announcement
However, this move has raised concerns among market observers. It is important to note that there is no absolute assurance that loan recipients will fulfill their obligation to repay.
Additionally, the ability of Tether to promptly liquidate these loans is not certain. Moreover, there has been a lack of sufficient transparency from Tether regarding the nature of the collateral provided by the borrowers.
Despite the aforementioned uncertainties, Welch has expressed that these loans are projected to be completely paid off by the year 2024. She further asserted that this lending practice has been beneficial in preventing customers from defaulting on their existing loans and has also enhanced liquidity.
Tether’s USDT stablecoin dominance, which currently holds a market capitalization surpassing $83 billion, presents a potential hazard to the cryptocurrency market and existing loans. This value marks a substantial growth from its $68 billion market cap in March, a surge largely attributed to Tether’s ventures into the mining sector and investments in Bitcoin.
The consistent provision of loans and asset growth by Tether Holdings could be interpreted as a sign of faith in its own cryptocurrency. However, the company’s decision to continue offering secured loans, despite a lack of transparency regarding borrower details, raises a lot of questions.
Furthermore, Tether Holdings’ choice to continue this practice contradicts its pledge to discontinue it by 2023, casting doubt on its long-term strategy and dedication to transparency.
