Tether said the new loans were made at the request of some of its long-standing partners, and it plans to cut it down to zero by 2024.
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Tether, the largest stablecoin issuer in the crypto market, has seen a rise in its stablecoin lending, or secured loans, in 2023, despite the firm having announced it will cut such loans down to zero in December 2022.
In the company’s latest quarterly report, Tether noted that its assets included $5.5 billion of loans as of June 30, up from $5.3 billion in the previous quarter. A Tether spokesperson told The Wall Street Journal (WSJ) that the recent rise in stablecoin lending was due to a few short-term loan requests from clients with whom the firm has “cultivated longstanding relationships.” The spokesperson also said the company plans to cut such loans to zero by 2024.
Stablecoin loans had become a popular lending product for Tether, allowing customers to borrow USDT from Tether in return for some collateral. However, these secured loans were always shrouded in controversy due to a lack of transparency on the collateral and the borrowers.
A WSJ report in December 2022 raised concerns about the products and claims that the loans were not fully collateralized. The WSJ questioned Tether’s ability to meet redemption requirements in times of crisis.
Related: Crypto Biz: You can’t stop the Tether FUD
Tether addressed the controversies in 2022 before announcing its plan to eliminate secured loans in 2023. At the time, the stablecoin issuer called the concerns around secured loans “FUD” and claimed the loans were overcollateralized.
The recent rise in secured loans for Tether comes amid growing market dominance and profit for the firm. Tether reported $3.3 billion in surplus reserves in September, up from $250 million in 2022. Cointelegraph reached out to Tether for comment but has not received a response.
However, Tether did release a response to the WSJ article claiming the publication’s concerns around stablecoin loans are uncalled for. Tether added that as a company with $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.”
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