Tether has increasingly been lending its own coins, adding risks to the stablecoin that is an important cog in the crypto system
A Delaware court where FTX’s bankruptcy is being handled. The recent collapse of the cryptocurrency exchange has hit digital currency prices.“Eligible clients are borrowing USDT,” Ms. Welch said, using an abbreviation for tether. “Loans are overcollateralized by extremely liquid assets that Tether’s prudent risk management admits as collateral.”by investing in safe, low-yielding securities such as Treasurys.
While the statement was meant to calm investors, it also highlights the risk of Tether’s loans. Tether in a separate news release on Nov. 17 said it “was able to liquidate Celsius’s collateral with such precision that Tether was even able to return some of the collateral.” Because Tether doesn’t disclose the collateral in its reports, it is impossible for investors to know details of what was sold and under what conditions.
Tether has also left it unclear whether any of its loans are to related parties, which can be a red flag for investors. Tether’s reports used to say that none of the loans were to affiliated entities. However, it dropped that language starting with its report for the second quarter of 2022. Ms. Welch wouldn’t say why Tether dropped the language and declined to say how much, if any, of Tether’s loans were to related parties as of Sept. 30.
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