In a surprising turn of events, the issuer of the world’s largest stablecoin, Tether, has resumed lending its own stablecoin to customers, reversing a decision made less than a year ago. The latest quarterly financial update from the cryptocurrency issuer revealed that as of June 30, it held $5.5 billion in loans, marking an increase from the $5.3 billion reported just a quarter earlier. A Tether representative confirmed that the firm had indeed extended new loans.
This decision to restart lending is a complete reversal from its stance in December 2022, when the firm announced its intention to gradually reduce secured loans to zero throughout 2023. According to Alex Welch, a spokeswoman for Tether Holdings, this shift in strategy is in response to short-term loan requests from long-standing clients during the second quarter of 2023. Welch emphasized that these decisions were made to accommodate these client requests.
While the stablecoin issuer has set a timeline to eliminate loans by 2024, the spokesperson did not elaborate on the specific circumstances that led to clients potentially needing to sell their collateral at unfavorable prices. Tether Holdings’ lack of audited financial statements and a complete balance sheet adds an additional layer of opacity, leaving external observers with a limited understanding of the company’s financial situation.
Tether’s primary objective in extending these loans appears to be the preservation of customers’ liquidity and the prevention of scenarios where they might be compelled to sell their collateral at disadvantageous prices, potentially incurring losses.
Tether: Safety Net or Black Swan?
This move by Tether has generated a range of reactions within the crypto community. Some are concerned that it could introduce unforeseen risks akin to a black swan event, while others view it as an intriguing strategic decision. It seems evident that Tether is positioning itself to act as a safety net for its long-term customers, assisting them in navigating short-term liquidity challenges.
Nevertheless, users are urged to exercise caution, thoroughly grasp the terms, and remain vigilant to avoid unanticipated complications. One user articulated, “It’s reassuring to witness Tether prioritizing the needs of its customers and maintaining liquidity support during times of short-term financial constraints. This strategic move underscores their commitment to stability within the crypto landscape.”