Tether said it will remove all secured loans in its reserves come 2023 as the stablecoin issuer fights an ongoing public relations battle.
The move comes after a flurry of media attacks were hurled against Tether, primarily hailing from a Dec. 1st Wall Street Journal report saying that its secured loan was 9 percent (about $6.1 billion) of its total assets as of Sept. 30th. The report added that the stablecoin issuer might not have enough assets on hand to pay redemptions due to these loans.
Tether did not take the accusation lying down.
In a December 13th blog, the company countered the claim, noting that the “secured loans held in its reserves are overcollateralized and covered by extremely liquid assets.”
“Tether is professionally and conservatively managed and this will be demonstrated once again by successfully winding down the lending business without losses (since all loans are over-collateralized by liquid assets).”
Tether loans stress tested
Tether’s secured loans operate similarly to how private banks lend to customers via secured collateral, the company explained. But unlike banks which use fractional reserves, Tether claims that its loans are over 100 percent backed. This claim was stress tested in May at the height of the Luna-foundation’s meltdown, when over $10 billion tokens were redeemed in 24 hours.
Per the company’s statement, Tether will continue to “show resilience through the most uncertain times, regardless of the story fabrications and disinformation concocted by Tether Truthers and click bait headlines from mainstream media that have been consistently wrong about Tether, for close to a decade.” In August, the Wall Street Journal also targeted Tether, saying it could be deemed ‘technically insolvent’ if its assets fell just 0.3 percent.
The company cut down its commercial paper to zero in October following concerns about the quality of its assets. At the same time, Tether also says it increased its legitimacy and transparency of its attestations by hiring a top-5- accounting firm.
At $66 billion dollars in assets, Tether’s USDT continues to be the leading stablecoin by market cap. The issuer has a dominant market share of 47 percent, per data from CoinGecko